SOME THOUGHTS ON 2023Jan 16, 2023
The future is always hard to predict, but this year it seems to be even harder: We have far too many input factors, that look like extreme wild cards:
- The length of the Ukraine war and the subsequent constraints on energy and agricultural markets is completely uncertain
- The effects on global inflation rates are just the same as undefined
- The extent of partial deglobalization is not clear yet
- Winners and losers of this paradigm shift are a given for few sectors only
- Economic growth is therefore up for negative or positive surprises
So let us focus on what seems to be almost certain:
- Even if inflation comes down, if only for base effects, higher prices are here to stay:
Persisting geopolitical tensions, partial deglobalization, decarbonization and many other phenomena will ensure that.
- No asset class is cheap: real assets -listed or not- had a phantastic rally ever since the financial crisis, fixed income suffers from higher interest rates, crypto from a heavy decrease in trust, commodities are mostly a derivative of the economic growth that does not look perfectly promising and gold is a proxy of the external value of USD. A strong dollar therefore blocks gold from adding stability to portfolios.
- The social dimension of this changing world has become more important and will put especially western societies and economies under additional pressure.
Three areas will decide upon investment success in 2023:
- Top-level plans based upon strategic asset allocation (SAA) and overall robustness:
Looking only at SAA is short-sighted in a world, that offers fundamental and exogenous risks we almost had forgotten during the cold war. In the end you want to tackle the ultimate dimension of asset protection, including a second citizenship, a third home, a fourth bank and the like. But before working on that, you should analyze the robustness of your overall wealth (there is a free download of our robustness indication at beewyzer.com ).
- The entrepreneurial approach when picking investments that still offer upside:
When no asset class is cheap, it is the individual asset you invest in, that may offer value potential. And it is the investment approach you manage, that releases this potential. Buy and hold will be less promising than in the past 10 years. Buy, manage, sell, do not hold on to an asset for too long, re-invest soon, always stay on alert. Only active investors can expect outperformance, no matter what asset class.
- Risk management as realized with robustness, appropriate hedging and flexibility:
Get the robustness of your overall wealth portfolio right, apply hedging techniques on the spot when you have the conviction that risks are too high, or use them on an ongoing basis as insurance police. But most of all, stay flexible, question the decision you took yesterday and change it without regrets, if necessary. And invest in your financial education – but at BeeWyzer we always say that.
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