022 Recap: A Year Full of Volatility
Due to a global turmoil, 2022 has been a painful year for traditional investment assets. In the post-pandemic period, equities and fixed income declined hand-in-hand with a historically high correlation, thanks to swiftly rising central bank rates in the west. Meanwhile, the safe-haven assets, such as USD and precious metals (e.g., gold and silver) have shown resiliency due to higher demand for riskless investment opportunities. Performance of the energy sector was also positive. Energy producers, refiners, and distributors have benefitted significantly form higher oil and gas prices owed to Russia’s invasion of Ukraine and a resulting energy crisis in Europe. As a result, the energy sector was the only strong gainer in equities.
2023 is expected to deliver more favorable performance across major asset classes, however, with significant volatility. With Russia-Ukraine war and China’s economic freeze expected to be gradually resolved, global inflation is forecasted to cool further throughout 2023. De-escalation of Europe’s energy crisis due to falling energy prices will provide a further sizeable downward pressure on inflation. Lastly, despite uncertainty around inflation rates returning to target levels, the pivot from major central banks is widely anticipated in 2023. Importantly, however, resolve of the abovementioned global issues is more likely to come about in 2H23. Consequently, a shift from low-risk to high-risk assets is more reasonable in mid-2023. For more details on the yearly 2023 expectations, please refer to our full 2023 Investment Outlook report.
