Inflation to remain elevated in 2023

January 02, 2023 (MLN): Markets have been overwhelmed by inflation this year, and the same situation will remain intact in 2023. This marks the end of the easy money period and raises the possibility that excessive tightening by central banks would result in a severe recession, or "inflation bust," said Andrew McCaffery Global CIO, Asset Management to Fidelity International.

The rise in inflation for asset markets in 2023 could be made worse by additional dangers including geopolitical unpredictability and the growing separation of large economies from globalized supply and collaboration networks.

Meanwhile, as households struggle with a combination of increased energy and loan payment expenses, consumer spending could experience a steep decrease.

Some of the 2022 pressures might subside in 2023, especially with regard to transportation and supply chain disruption.

In this investment outlook, experts have suggested how to handle this atypical crisis-driven cycle in 2023. One approach to boost diversification is through emerging markets and Asian nations, which have weaker growth correlations with the US and Europe. Cash and high-quality investment-grade securities provide defensive qualities.

Investors will be able to look for idiosyncratic components in their portfolios as the dispersion of returns rises rather than relying on entire market movements to create returns.

Longer-term topics like decarbonization and reindustrialization should also start to present opportunities among securities, which may attract investor interest sooner rather than later.

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