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Education Series: Single-Stock ETPs

Would 2023 be boom or bust?

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

The European Central Bank hiked interest rates by 50 basis points during its last monetary policy meeting of 2022, marking the fourth rate increase for the year. The central bank slowed the pace of increases; however, it remains committed to contain record high inflation and warned that further interest rate increases are required due to a substantial upward revision to the inflation outlook.

Average inflation is seen reaching 8.4% in 2022 before decreasing to 6.3% in 2023. Inflation is then projected to average 3.4% in 2024 and 2.3% in 2025. GDP for the Euro Area may contract in the current and next quarter, due to the energy crisis, high uncertainty, weakening global economic activity and tighter financing conditions. Overall, the central bank now sees the economy growing by 3.4% in 2022, 0.5% in 2023, 1.9% in 2024 and 1.8% in 2025.

European Union energy ministers on Monday finally agreed on a gas price cap at €180 per megawatt hour, in the latest attempt to lower gas prices that have pushed energy bills higher and have been the main culprit for record-high inflation this year.

The Ifo Business Climate indicator for Germany rose for a third consecutive month to 88.6 in December 2022, beating market expectations of 87.4. Sentiment improved despite high inflation and the ongoing energy crisis as expectations for the coming months were significantly less pessimistic (83.2 vs 80.2 in November).

According to Destatis, the German producer price index (PPI) fell 3.9% MoM in November, sharper than expected, compared to a 4.2% fall in October. The annual producer inflation in Germany fell to 28.2% in November 2022 from 34.5% in October, below market forecasts of 30.6%. Energy prices remained the biggest upward contributor, namely the distribution of natural gas and electricity. Excluding energy, producer prices climbed 12.7% from a year earlier.

The Gfk German Consumer Climate Index in Germany which measures the level of consumer confidence in economic activity was released on Wednesday. The GfK Indicator rose to -37.8 heading into January of 2023 from a revised -40.1 in December, beating market expectations of -38.0. The current reading of the forward-looking index marks the third straight month of a small but gradual improvement in sentiment amid government energy measures.

Germany’s Ifo economic institute said in a statement on Wednesday, the outlook for Germany’s labor market is expected to be upbeat for the first quarter of 2023, driven primarily by service providers.

Source: Tradingview

Equity markets embarked on a Santa rally on lack of major economic news this week; however global indices have been trading in the red during the festive week. The German benchmark index rebounded on Wednesday as consumer sentiment in Europe’s largest economy has improved. The market may attempt to finish the year on a positive foot on hopes the widely expected economic slowdown in 2023 may be milder than feared, despite the energy crisis and still high inflation.

However, traders continue to digest hawkish messages from major central banks and try to assess the impact that even higher interest rates will have on the economy in 2023. Given the strong rebound from the October 2022 low we continue to believe that near-term upside from here is likely to be limited and that 2023 is likely to be volatile with massive swings in both directions. We see high probability of declines in excess of 20% from current levels.

Active traders looking for magnified exposure to the German stock market may consider our 3x Long Germany 40 and -3x Short Germany 40 ETPs.

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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Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Senior Analyst

Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Director

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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