5 reasons 2023 will be a tough year for global markets
Those who come bearing warnings are rarely popular. Cassandra didn’t do herself any favors when she told her fellow Trojans to beware of the Greeks and their wooden horse. But, with financial markets facing unprecedented turbulence, it’s important to take a hard look at economic realities.
Analysts agree markets face serious headwinds. The International Monetary Fund has forecast that one-third of the world’s economy will be in recession in 2023. Energy is in high demand and short supply, prices are high and rising and emerging economies are coming out of the pandemic in shaky conditions.
There are five fundamental — and interlinked — issues that spell trouble for asset markets in 2023, with the understanding that in uncertain environments, there are no clear choices for investors. Every decision requires trade-offs.
Without dramatic changes in the geopolitical and economic landscape, fossil fuel shortages look likely to persist through next winter.
Russian supplies have been slashed by sanctions related to the war in Ukraine, while Europe’s energy architecture suffered irreparable damage when a blast destroyed part of the Nord Stream 1 pipeline. It’s irreparable because new infrastructure takes time and money to build and ESG mandates make it tough for energy companies to justify large-scale fossil fuel projects.
Related: Bitcoin will surge in 2023 — but be careful what you wish for
Meanwhile, already strong demand will only increase once China emerges from its COVID-19 slowdown. Record growth in renewables and electric vehicles has helped. But there are limits. Renewables require hard-to-source elements such as lithium, cobalt, chromium and aluminum. Nuclear would ease the pressure, but new plants take years to bring
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