As the new year rolls and we leave 2022 behind, a year marked by notoriously bearish global markets, the question hanging in the air is: What will 2023 look like? What are the prospects for 2023 for investors around the world? The answer is that, despite signals from financial markets, investors are more optimistic than you might think, according to a new survey by Investing.com.
While conventional wisdom suggests that investors would be waving the white flag after a painful 2022, an earlier survey conducted by Investing.com revealed that although retail investors in the US are experiencing financial fatigue and fatigue, as their portfolios continue to take a hit after hit, surprisingly, they maintain a hopeful outlook for 2023.
Thus, according to Investing.com, the world’s largest financial markets platform, with editions in 44 languages and users in 136 countries, the current mindset of retail investors is largely the same in other countries.
Surveyed at the end of December, more than 90% of investors in Turkey (95%) and Brazil (94%) still plan to continue investing in the first months of 2023, compared to 89% in Spain and 80% in Italy. (In the US, 90% of retail investors still planned to continue investing in the final months of 2022, according to the previous survey.)
A bullish 2023?
Investor optimism is also reflected in the fact that more than half of respondents foresee the start of a bull market in the next 12 months, led by Turkish investors (73%), followed by those from Spain (67%), Italy (59%), USA (57%) and Brazil (35%).
“A new generation of retail investors, who entered the market at the height of the pandemic, have become accustomed to buying in dips, regardless of market conditions, valuation concerns and macroeconomic concerns,” said Jesse Cohen, an analyst at Investing.com. “In many ways, the retail investor has become a more powerful collective force than the professional investor and simply doesn’t care about the same things as the experts.”
While institutional investors are reportedly increasingly abandoning equities, retail investors’ portfolios remain largely comprised of equities, including 85% in the US, 78% in Italy, 74% in Brazil, 68% in Spain and 67% in Turkey.
“Although further market volatility is expected in early 2023, stocks are poised to stage a sharp rally amid signs that inflation may have peaked, potentially allowing central banks around the world to pivot on monetary policy and begin cutting rates in response to a slowing economy.” Cohen said. “In fact, stock markets have a consistent track record of recovering from steep losses and rallying to records over time.”
2022: The Year of Falls
Of course, this relatively optimistic outlook doesn’t soften the blow of a notoriously bearish year, as most retail investors saw the value of their portfolios fall during 2022. This includes 76% of investors in the US, followed by 66% in Italy and 51% in Spain. However, in Brazil, only 43% saw their portfolios suffer losses (vs. 40% who experienced gains), and in Turkey, a whopping 78% saw their portfolios increase in value and only 15% experienced losses.
Deepening the market slump, tech stocks experienced an especially tough 2022, as shares of Intel have fallen by 53% and the value of the NASDAQ It has plummeted by more than a third. 56% of respondents in the US say that the fall in technology stocks is not over and that they foresee more losses for technology stocks in the remaining months of 2022.
Will there be a rebound in technology in 2023? Will it be the year of the final renewable energy boom?
However, a significant number of investors believe that 2023 could be ripe for a rebound in the tech sector. 34% of US investors believe that technology is the sector with the most potential in the coming months, followed by 28% of investors in Spain, 27% in Brazil and 10% in Turkey. Citi analysts also foresee a year of recovery for tech stocks in 2023.
Investors are also optimistic about renewables by 2023, with 39% of Turkish investors considering it the sector with the most potential in the coming months, followed by 29% in the United States, 27% in Brazil and 17% in Spain.
“Companies involved in the low-carbon energy industry, such as solar panel manufacturers and wind turbine manufacturers, as well as companies working across the electric vehicle supply chain, are the ones that will benefit the most as the world moves away from fossil fuels in favor of alternative energy.” Cohen testified.
No trust in cryptocurrencies
When it comes to cryptocurrencies, investors around the world are demonstrating a thirst for stability. In the US, 42% of retail investors have reduced their investments or withdrawn completely from cryptocurrencies this past year, up from 39% in Spain, 32% in Brazil, 22% in Turkey and 19% in Italy.
35% of Spanish respondents are currently cryptocurrency investors, followed by 31% in both the US and Brazil, and 25% in Italy. The U.S. figure represents a drastic decline from the 67% cryptocurrency investment rate that Investing.com documented in the November 2021 survey.
60% of US investors expect the value of cryptocurrencies to plummet further over the next year, a belief shared by 45% of respondents in Brazil, 42% in Italy, 36% in Spain and 18% in Turkey. This indicates that the golden age of cryptocurrency investing may already have come to an end. Only 12% of US investors believe cryptocurrencies will reach their previous highs, as will 15% in Italy, 16% in Brazil, 17% in Turkey and 18% in Spain.
“Rising interest rates and bond yields have been weighing on cryptocurrencies for most of the year,” Cohen said. “When rates are low, investors are more likely to jump into risk-sensitive assets. However, when rates start to rise, investors become much more sensitive to risk, and that’s what we’ve seen in the cryptocurrency market.”
Ultimately, it’s impossible to sugarcoat the reality that 2022 took a heavy toll on investors. But retail investors’ assessment of the future, both in the short and long term, is remarkably hopeful and confirms their intention to hold on in financial markets through 2023.