2022 was the year we will all remember as being the one in which we came out of the pandemic. Fred Razak, Chief Trading Strategist at CMTrading, weighs in on what that really meant and what outlook for 2023 might be.
Summarise 2022
“Toward the end of 2021 we began to come out of the pandemic, 2022 was going to be the year we escaped it completely. At the start of 2022, countries were easing border controls and relaxing the coronavirus standards around meetings, and lockdowns. We had all expected 2022 to come out of the gates strong and extend the rally that was being hinted at, at the end of 2021. And it started happening, with all the monetary policy relaxation and funds being flushed into the economy by government, companies started to do well, but they hit a wall when governments started looking to get some of that money back.”
“In the end the markets are down for 2022. The question is, how much are they down? Well, a company like JP Morgan, which was trading at $172 went down as low as $100. It has now recovered to about $135, which echoes the same trend as the Dow Jones, which is at a midpoint from its highs and lows. What this means is that people are going to look back at 2022 and say, ‘okay, we sold off after the pandemic, and things got bad, but ultimately it wasn’t the blood bath it could have been”.
“This process of coming out of the pandemic is turning out to be a much longer, but also more gradual process than we had initially predicted and this is reflecting in these kind of middling, stalled bear markets that we are seeing.”
Outlook 2023
“For the first half of 2023 we should expect to see traders holding their positions. The market is still digesting the full ramifications of things like inflation and corporate earnings. Just last week Facebook laid off 13 000 workers. Twitter has done 4000. There are a number of companies that are looking at the situation and saying, ‘let’s preserve our capital and see how far the down turn is’. What is the impact of that? We don’t know yet, so expect the markets to remain circumspect.”
“I think we are going to continue seeing a slow down in growth, particularly if interest rates remain this high. People are going to be shying away from some areas like new housing. Interest rates affect peoples’ ability to enter these markets and as a result these industries are going to be heavily impacted for sure.”
What is the prediction for energy prices in 2023?
“There is a certain shift in the world right now as to the balance of power when it comes to energy. This war in Ukraine is perhaps much bigger than we see the media portray. I don’t believe that Russia is as down-and-out as the media seems to be suggesting and we may yet see the full extent of Vladimir Putin’s plans. I think we will get telling signs as to what his agenda truly is within the next six months to a year.”
“There are many factors (geopolitical balance, economic activity, consumer demands etc…) involved in the energy crisis at present for us to truly make predictions as to the outcomes. We can’t say for sure, that oil will go up or down, but like with crisis in the past, we need to monitor and keep an open mind.”
