I markets in 2023 seem to have regained the good humor lost last year due to the Russian invasion of theUkraine, of the surge of the energy prices and the explosion ofinflation. In Europe, in particular, bonds have also recovered part of the lost ground and theeuro it got stronger. Yes, but why? “The rise was for solid reasons,” he explains Alessandro Fugnoli, Kairos Strategist, in his podcast “On the 4th floor".
Markets 2023: the reasons for the race
The first is "the drop in inflation”, broad and faster than expected, the second is the good stability of most of the economic indicators, among which the labor market stands out. The third? There Chinese breakthrough on Covid, accompanied by measures to support the real estate sector, an easing of political controls on the private sector and an imminent recovery in consumption and foreign trade. Finally, the reduction of consumption due to higher than average temperatures and the consequent drop in energy prices.
"These positive surprises they then found a stock market that was instead preparing to enter a recession and was therefore exhausted and psychologically exhausted. Positioning and sentiment have thus contributed to a recovery that very few expected in these proportions", analyzes Fugnoli, who however warns: "The rise, therefore, is justified, but its very speed and intensity would now require a consolidation pause".
Markets 2023: the reasons that invite caution
According to Fugnoli, in fact, beyond the technical aspects, “the reasons that invite some caution for the next phase they are also numerous”. Firstly, despite the decline, inflation is still visible in services and in the labor market, which will induce central banks to continue firmly on the line of increases. "The rate hike it has begun to cool the economy, but has not yet entered its tightening phase, which is about to begin. The ultimate goal of central banks is to stop inflation completely without causing one recession, but a further slowdown in growth between now and the end of the year will be hard to avoid, particularly in the US,” predicts the Strategist.
A second aspect to take into consideration concerns businesses which, with inflation falling, will not be able to inflate revenues and profits by raising the prices of their products, while costs will maintain their growth trajectory. “There will therefore be a certain margin pressure that the markets, until now, have incorporated little into prices”, argues the economist.
Markets 2023: what to do? Distribute purchases
Moving from market analysis to investment strategies, "the indication is not to lighten up while waiting for who knows what retreat, but rather to distribute purchases waiting for the cyclical recovery of next year, throughout 2023, avoiding necessarily chasing the rise of this January”, advises Fugnoli, according to which 2023 will offer various favorable entry moments. “Let's therefore avoid getting too enticed by this positive phase e we keep some cash to be used gradually over the next few months”, he concludes.
