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März 24, 2023
Central banks have decided to further tighten monetary policy and to increase their guidelines. In this way, they are preventing increased pressure and a further broadening of inflation. US CPI has declined over the last few weeks and was most recently at 6.4%.
Global growth momentum has slowed further. At the same time, inflation in many countries is noticeably above the central banks’ targets. Accordingly, many central banks have further tightened their monetary policy. In the medium term, however, inflation abroad should return to more moderate levels, not least because of the increasingly tightening monetary policy in many places. Employment continued to grow, and overall economic production capacities were well utilized until recently, but it is too early to give the all-clear.
The article of the Italian economist Enrico Colombatto is sharing good reflections on the “next stage of inflation” https://www.gisreportsonline.com/r/inflation-central-banks/.
While the 95th Academy Awards were presented on Sunday, the FED is acting after the tech lender Silicon Valley Bank collapsed before the weekend. In a related action, the government shut down Signature Bank, which was teetering on the brink of collapse in recent days. Wall Street investors were relieved by the intervention after markets tumbled late last week, but some analysts say smaller banks that are disproportionately tied to cash-strapped industries like tech and crypto may be in for a rough ride.
Read more about this graph on https://www.shopify.com/sg/enterprise/consumer-behavior-trends. It is interesting to learn more about post COVID behaviour, and the way it might impact corporate earnings and business models.
India proved to be an economic bright spot amid volatile global markets in 2022, and the conditions which drove it to that point are expected to continue in 2023. Growth in India is strong, with gross-domestic product stable and a growth rate of between 6 per cent and 6.5 per cent, depending on sources. February was a particularly interesting month for the Indian stock markets. Wild stock movements with key Adani Group companies hitting their upper and lower circuits throughout the month, thanks to Hindenburg’s report alleging corporate misgovernance and alleged fraud by Gautam Adani, kept stock market participants on hold.
Since the purchasing managers‘ index already rose sharply in December but did not cross the growth threshold of 50 points again until January 2023, the strong increase in sales at the end of 2022 cannot only be explained by a recovery in demand. It was probably also a result of increased prices.
In summary, companies were able to generate the highest turnover since the time series in 2015. This also explains the strong price gains on the stock market.
What is a blessing for shareholders has been an expensive pleasure for many consumers. Because now it is virtually proven what we actually knew for a long time and why the governments have introduced excess profit taxes: The companies have used the mixed situation of the corona crisis, Ukraine war and exploding energy prices to fill their pockets with reference to increased costs – at the expense of customers.
US Corporate Earnings keep recovering and growing. For Q3 2023 and Q4 2023, analysts are projecting earnings growth of 3.4% and 10.1%, respectively. For all of CY 2023, analysts predict earnings growth of 2.5%. The forward 12-month P/E ratio is 18.0, which is below the 5-year average (18.5) but above the 10-year average (17.2).
Although the sudden end of China’s zero-COVID policy led to a massive increase in infections as 2022 came to a close, it also positioned the economy for a long-awaited return to normalcy. With policymakers stressing consumption and providing stimulus and liquidity, China’s growth outlook has improved dramatically. 2023 is the Year of the Rabbit. The sign of Rabbit is a symbol of longevity, peace, and prosperity in Chinese culture. 2023 is predicted to be a year of hope. Some will be reuniting with family members for the first time in three years, while others will be leaping at the chance to finally travel abroad again.
With virtually all COVID-19 restrictions in China now lifted, it is expected to see a major increase in travel and consumption activity from previous years. This is a positive development for businesses and will be a clear sign that China’s economy is on the road to recovery.
Investing in financial markets is almost always a risky endeavor but especially so during an inflationary period. Inflation first and foremost has a negative effect as the purchasing power of money decreases. Less can be bought for the same amount of money! Therefore, inflation is often cited as comparable to an additional tax.
By not allocating financial resources and keeping cash, a loss in relative terms is guaranteed. Unfortunately, investing in financial markets, does not always lead to positive results. Especially in the short term, markets are very difficult to predict. Therefore, it is important to take a long-term approach when investing in general and especially in inflationary periods, as short-term gains may be offset by a decrease in value over time.
Additionally, investors should diversify their portfolios to include both inflation-hedged assets and investments that have the potential to outperform inflation. This will help to protect your investments from the negative effects of inflation.
Investments that are expected to outperform during inflationary periods include stocks, real estate, and gold.
Stocks can provide the potential for growth, as companies may increase their prices to offset inflation and benefit from strong economic growth.
Real estate can be an inflation hedge, as rents may rise to offset the effect of inflation on the value of the property.
Gold is also a popular inflation hedge, as it is seen as a safe-haven asset and is traditionally seen as a hedge against inflation.
As the risk of a slowdown in growth and even a recession remains above average due to the restrictive monetary policy and the geopolitical situation a strategic plan to invest and diversify is of utmost importance.
The ongoing adjustment of monetary policy and the uncertainties about the economic development will keep financial markets most probably in a more volatile environment.
Successful investors should follow a long-term plan and obeying to that plan to reach their financial objectives set out.
On our portfolio assessment platform ( https://jacotpartners.shinyapps.io/jp_portfolio_assessment/ ) all data is regularly updated so that various strategies can be modeled and compared.
„The biggest risk of all is not taking one.“ – Mellody Hobson
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Your JACOT Partners Financial Services Ltd
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