The EDIT

As we head into the final stretch of the year, we reflect on how 2023 has unfolded so far, and what the next few months may bring.

In January, our overall view was positive but that in 2023 we should anticipate prolonged disruption. The global economy was (and still is) struggling to right itself after Covid and the Russia/Ukraine war and other geopolitical and supply-side factors. Despite high inflation and interest rates, consumer spending remained buoyant and market sentiment remained high. The priority for the Fed – and therefore, other central banks – was on using monetary policy to cool the inflation rate whilst avoiding recession. It was likely to be another challenging year for the economy but in the usual cycle, indicators showed that things were slowly moving forward.

Currently, expert opinion appears divided into two camps – the ‘Goldilocks and the Three Bears’ thinkers, and those in the Stagflation camp. The ‘Goldilocksers’ see a soft landing for the economy, with inflation falling back to target levels, positive economic growth (although slower/neutral), a small rise in unemployment levels, and minimal impact on the wider economy. It is an optimistic view, and not without merit. Recent market data suggests that the monetary policy of higher base rates is working to slow inflation, though not as quickly as one would hope. Supply chain pressures are easing, and recent global GDP data suggests positive growth levels, although still weak.

Taking the opposite view, Stagflationists see the economic outlook less positively: continuing shocks to the economy cause inflation to remain stubbornly high, consumer spending drops, and the labour market loosens.

In our view, elements of each could be true. We prefer to take the middle lane, and as ever, adopt a watchful approach. Our focus is on making sure our clients’ portfolios are diversified with the right security selection, industry selection and geography, to capture market growth while reducing exposure to investment risk. We still expect the remainder of 2023 to be challenging on the ground, but stand by our initial prediction. Our long term view remains fixed on positive growth and using all the levers available to help our clients achieve their objectives – including investment growth but also tax planning and other strategies.