How the investment committee of Just Service Global see the next 12 months
Positive themes: Technology (selective), Healthcare, Asean, Fixed Interest,
Negative themes: China, EM, Commodities
Neutral: US economy
Heads or tails: Cryptocurrency
US economy: Neutral
The US economy is expected to stagnate in 2023, with real GDP growth slowing to 0.7% and then further falling to 0.4% in 2024. Interest rates are projected to remain high, and inflation rates are expected to stay above the Federal Reserve's long-term goal through 2024. The unemployment rate is predicted to increase to 5.1% by the end of this year before gradually declining to 4.5% by 2027. The housing sector is likely to remain under significant pressure, with sales plunging by 30% over the past year.
The technology industry is expected to continue its growth trajectory in 2023. Emerging technologies such as Artificial Intelligence (AI), the Internet of Things (IoT), and 5G are expected to fuel the growth. The demand for cloud computing, cybersecurity, and digital transformation services is also projected to increase. However, the industry may face some challenges, such as a shortage of skilled workers and supply chain disruptions. The increasing focus on data privacy and security may also result in stricter regulations for tech companies. Overall, the market outlook for the technology industry in 2023 is positive, with the potential for continued innovation and growth.
The field of AI is making significant strides that will revolutionize our world as we know it. We can expect massive advancements in the next 2 to 5 years. One example of this is Google's Bard, which enables users to inquire about any history and list all communications. This technology is mind-boggling. However, it's worth noting that some of the major players in the market, such as FAANG or NASDAQ, are currently overpriced.
The trend for AI in the medical and healthcare sectors is expected to boost the growth of the digital transformation market, which is projected to rise from USD 2.27 trillion in 2023 to USD 8.92 trillion by 2030. The healthcare industry may also benefit from the integration of IoT sensors and the adoption of cloud computing and AI technologies.
The ASEAN economies are expected to see moderate growth in 2023.
Singapore's economy is projected to grow by 2.2%. The growth is expected to be driven by the manufacturing (i.e. fertiliser industry) and finance sectors, with the government implementing measures to support these industries.
Cambodia's economy is forecast to grow by 6.5% in 2023, thanks to strong merchandise exports and foreign direct investment.
Laos's economy is also expected to grow at 3.9% in 2023, but the growth is subject to significant downside risks due to structural weaknesses, macroeconomic instability.
Indonesia's economy is projected to grow at around 5% in 2023, supported by strong investment and export growth. Infrastructure development and digital transformation are expected to drive productivity gains and create new business opportunities.
Malaysia's central bank maintains a growth forecast of between 4% and 5% for 2023, primarily driven by robust domestic demand and growth in the services and construction sectors. However, the country's GDP growth is expected to face headwinds from cooling global demand, supply chain bottlenecks.
The Philippines and Thailand are expected to experience economic growth in 2023. The manufacturing industry in Thailand has seen a strong upturn in output and new orders due to boosting domestic demands. In the Philippines, employment has rebounded and household spending is driving growth. The ASEAN region is expected to remain one of the fastest-growing regions of the world, with economic growth predicted to be 4.7%, slightly lower than 2022.
There are indicators suggesting China's economy is likely heading for a similar "lost decade" i.e. a slump, similar to what happened in Japan three decades ago. The concerns are largely due to the bursting of China's housing and credit market bubbles. We may be at the end of the period with China serving as the world's economy's main growth engine and the main driver of international commodity prices.
Home prices in China have fallen for 12 straight months and local governments are struggling to repay debts as land sales have reached a standstill.
The Chinese government's efforts to aid its own housing market and weak local governments mean there won't be much credit available for the healthier parts of the economy.
It is expected that the global metals and mining industry will face challenges due to deteriorating global macroeconomic conditions, resulting in sliding commodity prices and weaker equity market support. The global oil demand is expected to grow with China's rebound driving nearly 60% of growth. However, oil prices are expected to average 8 percent lower in 2023, compared to 2022 due to a shift towards renewable sources.
Fixed Interest (as an Asset Class): Positive
Based on recent banking sector stress, it is expected that 2023 will be a pivotal year for raising allocations to core fixed income assets. Inflation is expected to cool down but still remain persistently higher than central bank targets of 2%. The cyclical acceleration in demographic and geopolitical trends, and rapid monetary tightening suggest a more challenging macroeconomic environment in 2023, leading to increased uncertainties in the market. However, higher starting rates have raised return expectations for U.S. and international bonds, making fixed income a promising asset class for investors.
Cryptocurrencies: Could go either way. Very difficult to predict
The future of cryptocurrency as an asset class in 2023 is uncertain. While some experts predict that Bitcoin's value will rise due to greater acceptance by businesses and higher demand from Bitcoin ETFs, others believe that prices could fall further due to quantitative tapering by the Fed. Decentralized finance and decentralized autonomous organizations are expected to be the highest growth areas of crypto, whereas regulators are expected to clarify the legal gray zone of cryptocurrencies and hold a particular interest in stablecoins.
As always talk to your adviser within the Just Service Network if you would like information or otherwise review your personal financing planning.
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The Just Service Client Service Team