Where to invest in 2023? These are the most likely trends
Morningstar analysts believe that rates, whatever cap they reach, will experience 3% declines by the end of the year. Thus, if rates reach 5%, some year-end FOMC meetings will knock 200 basis points. As you might expect, this would not be a good move if you really want to beat inflation. On the other hand, one should not lose sight of the fact that the Fed’s decisions are closely tied to the numbers, which makes this Morningstar prediction not entirely safe.
But excluding that hypothetical rate cut, inflation would remain high for much of next year. Americans would face high prices on all goods and services, from everyday purchases to cars, subscriptions and so on. This translates into purchasing power remaining low and, as a consequence, capital flowing into certain asset classes.
This scenario makes Treasury Inflation Protection Securities (TIPS) an almost certain investment trend.
Although equities could be harmful to capital, refraining from investing would also have negative effects given the capital degrading power of inflation.
Safe haven assets could also be counted in this branch. However, it should not be forgotten that the performance of gold and other reserve metals has not been convincing.
2. Investments in alternative assets
Another popular potential destination for capital could be alternative investments. Some assets undervalued or despised by investors would finally be in their portfolios during 2023. Among these, commodities stand out. Alternative investments are almost a must regardless of collateral factors, as money cannot remain idle.
It is worth noting that alternative assets become a great value piece for a variety of reasons. It is worth saying that they have little or no correlation with stocks and bonds. The latter allows them to lock in the damage from the volatility of inflation and recession. In addition, they would enjoy a much bigger boost in their yields when compared to dividend stocks.
Most of these alternatives are restricted to a select group of experienced investors. But circumstances would prompt a wide variety of investment capital holders to put money into them. Among the main alternative assets are the aforementioned commodities and futures managed through a competitive selection of exchange-traded funds (ETFs) and low-value mutual funds.
Although this is a more expensive investment, it would be offset by the performance of these alternative assets, says Forbes. As such, this could be one of the favorite investment trends for the coming year. As far as commodities are concerned, the choice should be handled with great care considering that a severe recession would drive demand for many commodities to the floor.
3. The crypto market among the possible investment trends
The third of the possible places for capital, selected by this paper, are cryptocurrencies. They are among the most feared assets of 2022 due to the events and the spectacular falls they suffered. For many analysts, the bet on cryptocurrencies is “almost certain”, given that their bottom is “obvious”.
Simply put, 2023 could be a better year for cryptocurrencies, as they could hardly be worse off. In 2022, macroeconomic conditions coupled with scandals, hacks, frauds and massive bankruptcies of companies in the sector made headlines. Major crypto market assets suffered losses in excess of 70% reaching 98% in some cases.
The cryptocurrency slump ruined the capital of thousands of investors of all calibers, including the national assets of El Salvador. Naturally, that bleak outlook drove interest to a minimum. In the midst of such a state, a rebound is to be expected. At the other extreme, the correlation of these currencies with risky stocks could lead to further declines in value. It should not be lost sight of the fact that the consequences of the FTX bankruptcy have not yet fully manifested themselves.
Despite the current fear, the crypto market could be among the investment trends for 2023. One of the reasons for this is that the U.S. authorities could take decisive steps in the field of regulation, which would eliminate the anarchy of that market and ensure a minimum of security for investors. Legislators look enthusiastic and financial authorities are moving forward with a CBDC.
Be that as it may, investment in digital currencies will always be a high-risk issue due to the young nature of this market. However, this year’s debacle could be the prelude to a major bull-run, which are not rare in this sector.
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