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As the previous year drew to a close, virtually every major financial institution published their macroeconomic outlooks for 2023. Overall, most institutions expressed hopes for a recovery in markets. However, in terms of economics, the picture in Developed Markets (DM) countries – particularly the U.S. and the Eurozone – is particularly fraught. JP Morgan estimates that the personal savings rate among citizens have been largely erased and have fallen to 12-year lows, i.e. the time that led up to the Global Financial Crisis.
One particular sector that has been tanking has been the real estate market. JP Morgan makes an interesting proposition about this sector, which is crucial for determining economic health: given that the supply of housing for sale in the U.S. has seen a massive reduction, this implies that there possibly won’t be any more large-scale declines in housing prices. Over in the Eurozone, the average level of household debt has been low (at least relative to the U.S.), thus making it likely that housing price declines will find a bottom soon.
It’s a rather innovative argument about the mechanics of the market but it doesn’t bode too well for the economic health of the citizenry: if the average American or European isn’t leveraging their personal equity by purchasing property, this implies that there simply isn’t enough money to spend on goods and services.
Inflation has had a large role to play (for several years now) on this cratering of personal wealth in DM economies. Credit Suisse estimates that the countries hit worst by inflation – which is no longer “transitory” but rather entrenched – are the U.S., the U.K. and the Eurozone. For comparison, DM economies Japan and Switzerland have witnessed a more muted trajectory.
Inflation is being expected to continue into 2023. Deutsche Bank estimates that inflation ravaged the U.S. and Eurozone in particular, with Germany taking a bigger hit relative to the rest of Eurozone on average. The bank estimates that inflation might ease off a little bit in the U.S. while continuing to loom relatively larger in the Eurozone. Germany isn’t expected to catch a break in the new year either.
Over in Asia, Japan is expected to improve its handling of inflation while China is expected to continue to maintain the same trends in inflation as it displayed in 2022. There are indications that global manufacturing trends indicate a reduction in consumption in DM economies. Credit Suisse estimates this to have a historically observed correlated impact on the earnings reported by most leading publicly-traded companies.
Given that U.S. inflation is neither under control nor significantly curtailed yet, it could be argued that even with a modest increase, this signifies a contraction in real terms.
2022 showed DM economies in the Western Hemisphere taking the brunt of global inflationary trends. Credit Suisse estimated in October that this will continue in 2023 but inflation will rise in leading Emerging Markets (EM) economies such as India and Brazil.
However, since then, both Brazil and India have shown their willingness to combat inflationary trends with aggressive measures so this might be overstated. In fact, India and China are expected to be global leaders in economic growth in 2023 with other EM economies likely to be trending positive as well.
For instance, Morgan Stanley estimates that consensus view indicates that 2023 will be a stellar year for Indian economic growth, with China in 2nd place.
Overall, Credit Suisse also estimated that most equity markets won’t exceed 3% throughout 2023:
while the instruments of best growth will be the likes of high-quality corporate bonds and EM government bonds. The latter is a continuation of the theme that globalization is grinding to a halt while “localization” will begin to reign over the world.
BlackRock estimated that there isn’t nearly enough “damage” in the price to assume a sustained rebound in U.S. equity prices and valuations. In their framework, “damage” signifies loss of conviction and volumes needed to sustain historical valuation trends and trajectories.
A low-intensity conviction persistence in tech stocks during the first three quarters, particularly when options rolled over, provided plenty of fodder for false positive signals in overall trends for 2022. Inflow/outflow trends, however, were aligned with expectations in Q4. Retail investors typically lag in the learning curve relative to institutionals and have consistently cashed out of US and European equity markets over the past year rather than bet on the downside. 2022 was a stellar year for short sellers who cashed in hand over fist while retail investor favorites such as Tesla, Apple, NVIDIA and AMD tanked.
Investors that remain engaged in the market will likely continue to look at buying the dip in “growth” tech stocks, which will likely continue to deflate due to reduced traded volumes and ongoing institutional diversification.
Meanwhile, institutionals will find a target-rich environment in 2023 if the dollar trade gets less crowded: a rationalized dollar won’t induce selloffs by foreign central banks – a massive investor segment in US Treasuries – in order to stabilize their currencies. If the dollar weakens, EM Treasuries will also become very attractive. Added to this is a vast plethora of strong-performing stocks in EM countries and high-quality Investment Grade corporate bonds in the pipeline.
However, If the U.S. Federal Reserve decides to pivot on its aggressive rate cut policies or investment managers don’t continue exploring more sophisticated diversification strategies, the dollar trade will remain crowded which in turn will complicate the economic recovery cycle and exacerbate cost of funding for the U.S. government in its future debt issuances.
For retail investors that don’t simply buy in and wait but instead make tactical plays based on market dynamics, 2023 will be a stalwart year. Exchange-Traded Products (ETPs) provide magnified exposure while potential losses limited to only the invested amount and no further. Learn more about Exchange Traded Products that provide magnified exposure on either the upside or the downside of major markets, sectors and investor-favourite stocks here.
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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The ETP securities are intended for sophisticated investors who (i) are able to monitor their investment in the ETP securities on a frequent basis in line with the recommended holding period; (ii) understand the risk of compounded returns and the increased risk of investment in leveraged products; (iii) can afford to risk losing their investment; and (iv) and have a very short investment horizon in line with the recommended holding period. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer. This material is not intended to be relied upon as a forecast, research or investment advice and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Any decision to invest should be based on the information contained in the relevant base prospectus after seeking independent investment, tax and legal advice.
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If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
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The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
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Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.
By clicking you agree to the Terms and Conditions displayed.
Terms and Conditions
Notice
If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.
If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.
Risk Warnings
The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.
Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.
This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.
United States Visitors
The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.
Persons accessing this website in the European Economic Area
Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Exclusion of Liability
Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
Leverage Investment
Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.
Cookies
Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.
This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2.
By clicking you agree to the Terms and Conditions displayed.
