Hello Readers, Happy New Year! As promised, here are my predictions for 2023. This year will be a barometer for what we could expect for the rest of the decade. We kicked off the 2020s with a pandemic that slowed markets and halted many industries. Many countries reacted by cutting rates and injecting funds into their economies. In 2021 and 2022, we experienced a return to normalcy, increased demand for goods and services, and decades-high inflation. The ongoing Russia-Ukraine conflict came unexpectedly and disrupted recovery efforts, creating a lot of uncertainty across global markets. This year, I believe we will begin to feel the full effects of the ongoing conflict and quantitative tightening. Below are my predictions for 2023. Do you agree or disagree? Please let me know if any of these predictions are on your list. Feel feel to reach out at vanessa@inside.com, on LinkedIn, or on Twitter @VanessaOmeo. Here's hoping we all make it to the end of this year — individually, as a nation, and as a human race. |
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 U.S. Real GDP 2021 to 2022 A Recession, or not a Recession — that is the Question. One of the more divisive topics in 2022 was if the U.S. economy had entered a recession. The debate reached its tipping point after the economy contracted for the second consecutive quarter in Q2. Part of the confusion was the job market remained relatively strong (apart from tech) throughout the year, though YoY growth slowed towards the end. November unemployment rate stood at 3.7%, just 0.2% shy of the pre-pandemic Feb. 2020 rate of 3.5%. More: - The recession debate will continue, but I expect the U.S. economy to grow in 2023 at a much slower pace.
- Depending on where December inflation and employment numbers land, I expect the Fed to either forgo a rate increase at its first meeting or announce a 0.25% or 0.50% rate increase.
- Fed officials are scheduled to meet eight times this year, with the first meeting set for Jan. 31 to Feb. 1.
- One thing that could lead to a global recession that will pull the U.S. into it is if the Russia-Ukraine war drags on or escalates.
- Markets do not fare well with risk and uncertainty, and what greater risk is there than that of a global war? More on this in story number 5.
- The U.K. economy will suffer the most in Europe if the war escalates. Unlike its counterparts, who are members of the EU and can shoulder the economic burden together, the U.K. is isolated for the most part.
- I will end this section with the same thoughts I had last year: If you must ask if we are in a recession, we are not in a recession. In 2008, there were no debates.
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 Climate Change, Asset Managers, and ESGs This year may not be the best for climate activists or the environment, which is quite unfortunate for humans and our survival on this planet. Towards the end of the year, we saw more hostility towards firms backing environmental, social, and governance (ESG) initiatives. Florida notably pulled $2B worth of state assets from BlackRock over the firm’s ESG stance. Vanguard, the world’s second-largest asset manager, pulled out of the Net Zero Asset Managers (NZAM) initiative, a financial alliance aimed at tackling climate change. More: - Florida’s Chief Financial Officer Jimmy Patronis said BlackRock’s stance on climate change and other issues had nothing to do with maximizing returns.
- Patronis added that Florida needs partners within the financial services industry who are as committed to the bottom line as we are.
- In September, Florida suffered one of the deadliest hurricanes in U.S. history, Hurricane Ian.
- Damage from the Category 4 Atlantic storm is estimated to be between $50B and $65B.
- Last month, activist investor Bluebell Capital called for BlackRock CEO Larry Fink to resign, citing Fink’s “apparent hypocrisy” concerning the firm’s ESG stance.
- Bluebell accused BlackRock of politicizing the ESG debate due to the firm’s contradictory actions.
- Bluebell said BlackRock had changed its positions several times regarding investing in thermal coal production.
- As global growth slows this year, firms will be under more pressure to produce results, which may lead many to reverse or completely abandon their stance on ESG issues.
- Here’s hoping for more Greta Thunbergs to help get us back on the right path.
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 SEC Chairman Gary Gensler speaking before a House Appropriations Committee panel in May, 2020. SEC and Crypto Regulations This year was already poised to be an interesting year for the SEC and securities regulation in general; however, with the fallout from FTX’s collapse, I expect we will see and hear much more from the federal regulator. When FTX filed for bankruptcy in November and revealed the firm was making risky bets with customer deposits, many blamed the SEC for the fallout, accusing the regulator of failing to set clear guidelines for the crypto sector. More: - SEC Chair Gary Gensler has repeatedly pushed for crypto firms to abide by existing securities laws, noting that the current business model of some crypto firms would not be allowed in traditional finance due to multiple conflicts.
- Gensler said crypto firms should be held liable for compliance with existing rules, as these rules have been time-tested.
- The SEC and the Commodity Futures Trading Commission (CFTC) have been competing to control the crypto sector.
- Earlier this year, Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) introduced a bipartisan crypto legislation dubbed the Responsible Financial Innovation Act, which would classify digital assets as commodities like oil and wheat.
- The bill would grant crypto oversight authority to the CFTC.
- Last month, the SEC released a new guidance requiring firms that issue securities to disclose their exposure and risk to the crypto market to their investors.
- I expect we will see a broad new legislation/framework for the crypto industry this year.
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 Xi Jinping and Vladimir Putin | Credit: AFP Increased De-globalization and New Alliances One of the lesser-discussed impacts of the Russia-Ukraine war is de-globalization, the process of reduced interdependence between nations and/or regions, the opposite of globalization. Since the start of the Russia-Ukraine conflict, many countries have been working to shore up and reinforce resources critical to their national security, such as energy and semiconductor chips. I expect we will see increased de-globalization in 2023, especially between Western nations, Russia, and China. However, we will also see new alliances form between Russia, China, and the rest of the world. More: - In August, the U.S. approved a $280B semiconductor and science legislation aimed at reshoring critical chip production to the U.S. and competing with China.
- In November, Germany blocked a Chinese investor from buying ERS Electronic, a domestic semiconductor manufacturer based in Bavaria, citing national security concerns.
- China has been strengthening its ties with Russia, countries in Asia, and the Middle East, amid growing tensions with the U.S.
- Earlier this year, the WSJ reported that Saudi Arabia was in talks with China to price some of its oil sales to the country in yuan instead of USD.
- Saudi Arabia accounted for about 17% of China’s oil imports in 2021.
- Last month, Chinese President Xi Jinping attended the first China-Arab States Summit and the China-Gulf Cooperation Council Summit in Riyadh, Saudi Arabia.
- During the visit, King Salman of Saudi Arabia signed multiple strategic partnership agreements with President Xi Jinping, including a deal with Chinese tech giant Huawei.
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 Chinese aircraft over Taiwan airspace Inching towards WWIII One of the few stocks to outperform the S&P 500 in 2022 were defense stocks, which I personally view as a sign of great concern. Aerospace and defense stocks rose 15.5% last year compared to the S&P 500’s 19.4% decline. The Russia-Ukraine conflict sparked increased global demand for military aircraft and armaments in 2022. I expect and fear we will see more activity within the arms and defense sector this year. The threat of a third world war has never been greater. More: - U.S.-China tensions over Taiwan have been at an all-time high in recent weeks.
- Defense companies that were in the process of shutting down some of their product lines have restarted production due to increased demand as various nations build up their arms stockpiles.
- Last month the U.S. approved a $1.7T spending bill which includes $858B in defense spending.
- The amount also includes funds to restock Pentagon weapons the U.S. sent to Ukraine and additional support for NATO allies.
- Lockheed Martin, the largest military contractor in the U.S., booked more than $950M worth of military orders from the Pentagon.
- The U.S. military also awarded Raytheon Technologies more than $2B in contracts to deliver missile systems to restock weapons sent to Ukraine and increase its stockpile.
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 Other Predictions: - This year, try a resolution that sticks - going to therapy with BetterHelp. Save 25% off your first month.*
- Twitter’s Future: I might be an eternal optimist, but I expect Twitter to survive and improve significantly in 2023. This prediction is not based on the last several weeks, but on hoping that the current leadership are learning from their mistakes and have gained a better understanding of the platform and its value.
- Increased Travel and Experiences: I expect airlines to recover and possibly surpass their 2019 levels. With Covid-19 fully behind us (hopefully), consumers will prioritize travel and experiences this year. My advice is to try to see as much of the world as possible because with how things are going...
- A Covid Re-Emergence: Towards the end of the year, there were increased reports of Covid infections in China. Italy reported nearly half of the passengers on an inbound flight from China tested positive for Covid, bringing back memories of the onset of the virus in 2020. Covid might become a seasonal virus, but we are better prepared to handle it this time.
- Bitcoin and the larger Crypto Industry: 2022 was not a good year for Bitcoin and the larger crypto sector. Bitcoin lost more than 60% of its value in 2022, and the crypto industry lost nearly $2T. Consumers have been bruised by the collapse of 3AC, Voyager, Celsius Network, and, notably, FTX. For another wave of massive crypto adoption, regulation has to improve significantly.
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 |  | Vanessa Omeokachie is a writer for Inside.com; she writes the daily Inside Business newsletter. Her interests include finance, technology, and entrepreneurship. In her free time, she enjoys reading, hiking, attending concerts and music festivals, traveling, and exploring. Connect with her on Twitter @VanessaOmeo or on LinkedIn. |   | | Editor | Vibha Chapparike is a Freelance Writer & Editor at Inside.com. With her post-graduation in Management and Finance completed, Vibha is expanding her knowledge in venture capital, business, startups, and technology. She has had a career in public relations and communications. An ardent reader and writer currently residing in Singapore, you can follow Vibha on Twitter @VChapparike. | |
