The Buzz of the FSA Spy Market – December 23, 2022

It is the last To spy year column. And what a year it was. Certainly to forget, as far as the markets are concerned. Usually the industry comes around Christmas time and can look back on the past 12 months with some satisfaction. The real success in 2022 has been surviving to fight another day. Any hope for a year-end respite was rather brutally crushed as Wall Street slumped dramatically yesterday. A recovery at the end of the afternoon was not enough to put us back in the green. It was a stark and rather gruesome reminder that trust is razor thin. The outlook for global interest rates remains bearish – higher for longer is the pitiful projection. Closer to home, China is battling a massive wave of Covid with the ever-present threat of greater supply chain disruption. Meanwhile in Europe, Putin’s war in Ukraine rumbles needlessly, violently and painfully as a harsh winter descends on the region.

And yet, despite all this, To spy remain optimistic. It was Schroders’ Nick Kirrage, co-head of the global value team, speaking at a Bonhill conference in Cape Town a few years ago, who said: “To be long in gold is to be short in gold. human ingenuity. In the long run, it rarely worked. To spy never forgot those wise words. As the gloom descends, someone, somewhere dreams of an innovation, an idea, a business, a plan that will take humanity in another fruitful direction. People rarely stay home in a crisis and “do nothing”. Many great companies were forged during recessions. To name a few: Microsoft (1975), AirBnB (2008), GE {General Electric} (1876) and of course, disney (1929). Next year will be no different. The next big S&P 500 behemoth is probably sitting in a small garage or on a kitchen table, just waiting to get started.

For what it’s worth, here’s Spy Top 10 predictions for 2023 in no particular order.

  1. The ESG backlash will become even more political in America, which will positively lead to much better ESG analyzes and classifications. A particular focus on governance will emerge.
  2. Stock markets will have a horrible first half followed by a powerful rally in the second half as interest rates peak and then quickly come down.
  3. Alternative asset managers are going to have a year in the sun when it comes to asset raising. People will scramble for exotic strategies that promise the world and probably won’t deliver the implied or advertised returns, but that won’t stop the spreaders from throwing money at them.
  4. Hong Kong will gradually recover from its worst period in decades but, unfortunately, 2023 will not be enough to see it return to its former glory. In fact, it remains in at least five years.
  5. The ratio of ETFs launched to mutual funds launched will continue to rise and rise. ETF launches will trump mutual funds 10:1 or more as the ETF juggernaut progresses. Active ETFs will attract better flows.
  6. Singapore’s family office scene will become even more vibrant. Rather, the City of Lion’s momentum to become THE global hub for family offices outside of Europe will accelerate.
  7. Bitcoin will trade below $10,000 before May 1st. Most of the market will shrug because only hardcore holders will be talking to each other in a weed-strewn Reddit chat room.
  8. The price of oil will drop back below $50 a barrel as supply increases and demand declines.
  9. Warren Buffet will continue to be quoted even more often than usual despite Berkshire’s own performance meandering below par.
  10. France would win the Rugby World Cup, beating South Africa in the final in Paris, avenging their FIFA World Cup loss to Argentina.

If, as we hope many of you will, you take part in the FSA’s annual fund awards in 2023, To spy has some handy end-of-the-year tips. Telling FSA judges, as a group did this year, that “their big advantage over their competitors is that they don’t have anyone on the ground in Hong Kong, so they can take a more detached approach” doesn’t probably won’t win too many favors or hearts. Also, bragging that your portfolio manager’s average age was only 33 comes across as a little “ageist” and also unlikely to sway the most experienced, gray-haired judges.

And on that happy note, To spy and the entire FSA team thanks you for reading and for your continued support. We wish you all a very Merry Christmas and a happy, healthy and prosperous New Year as we head into the Year of the Water Rabbit.

Until 2023…

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