2023
Blog post description.
My predictions for 2022 proved with the passage of time to be very accurate, but i put that down to far more luck than judgement. Making market predictions apart from being fun is largely a futile pastime for so many reasons, which is why i always give it such little credence and time. We simply trade whatever we are given, we cannot influence the markets therefore pointless trying to predict their direction, but in the name of fun here goes: ........
The stock market throughout 2022 has fallen approximatly 20% in nominal terms, and a further 10% because of inflation, so a total fall of 30%. I feel that another 20% fall awaits out there within the next 2 years from either further nominal falls, or inflation falls or probably a combination of both as per this year. Inflation is not normally a major consideration, when it is running at 2 to 3% a year, but at 10 to 12% it is a very major loss consideration. If you had £1000 on 01/01/2022 and you placed it into the stockmarket it would have lost 20% so would have a nominal value of £800, BUT that £800 would only have the purchasing power because of 10% inflation experienced throughout the year of £700, THAT IS THE REAL LOSS OF 30%.
Housing in the UK peaked in August 2022, over the last 5 months it has fallen close to 5% and is falling quite rapidly now. However over the last 5 months inflation has also added another 4% loss for a total real loss of 9%. I feel that including inflation losses, which must be included as you otherwise lose large amounts of purchasing power, total losses in property over the next few years will be greater than 30% made up of nominal falls, inflation losses or a combination of both. So far we have had 9%. If losses are actually larger than 30% it would be no surprise at all to me, i say this because in August 2022 with mortgage rates at 2% property prices were already well into bubble territory, they were already overdue very large falls, with Mortgage rates now at over 6% that is a +300% rise in just a few months, and you really have a catastrophic situation. Add in sharply higher Petrol/Diesel, Natural Gas/Electricity, and Food prices and i am afraid property has nowhere to go but sharply down from here. The falls being recorded in the USA in the areas with the greatest booms are incredible, like San Francisco down 27% in the last few months, this is what awaits the UK, but not quite as extreme at least not in nominal terms, primarily because of a Government who keep housing in deliberate short supply.
Commodity inflation to continue but not at the same pace as we have seen in 2022, a much slower pace. Europe will survive the winter of 2022/2023 as regards natural gas supply, also electricity production.
Further power moving from the USA/NATO/EU countries to the BRIC,s countries which are now becoming a very formidable pact. large populations allied to vast amounts of natural resources and commodities. This trend was notable in 2022 and continues in 2023. It is a very important trend for all of us.
The Ukraine Russia war rumbles on. I have a prediction as to how this all ends in 2023 but i will keep that to myself, for personal reasons.
The UK Gilts market is a constant moving target, and it is telling us that interest rates have not peaked and are still on the rise, therefore putting even more pressure on mortgage rates. The housing markets future depends on this. If they leave the gilt market alone then rates rise, if they intervene rates stabilise but we have even more inflation.
I am bearish as regards the stockmarket for 2023, bearish as regards the bond market, and particuarly bearish as regards the property market which has only just started its bear market
It will be a very difficult year.