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Global Investment Themes for 2023

  • The global economy and markets have been buffeted by a series of crises this year

  • We assess the most fundamental trends and their potential impact on markets and investors in 2023, as the world recovers

  • Battles against inflation and recession, structural reforms, new military alliances will drive investment opportunities

Global Investment Themes for 2023
Duncan Wales
Duncan Wales

Chief Executive Officer

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Tellimer Research
22 November 2022
Published byTellimer Research

2022 has been the year of the permacrisis, with spiralling inflation, rising interest rates, the invasion of Ukraine by Russia, an energy shock in Europe, the Covid pandemic limping on and zero-Covid policies hobbling China, volatile markets and collapsing valuations; all of which has disrupted even the most thoughtful and best-laid plans of investors and policy makers.

For our 2023 Global Investment Themes, our analyst team has sifted through the damage, finding the green shoots of opportunity and uncovering the emerging new risks. Click on the titles below for the in-depth reports.

First in, first out: EMs will lead DMs out of the rate hiking cycle in 2023

As the world’s largest central banks continue playing catch-up with runaway inflation, it is easy to forget that some of their emerging market peers have been much more proactive and are now starting to ease their feet off their monetary brake pedals. Our new scorecard shows where the tightening cycle may be closest to ending.

The death of EM is greatly exaggerated

After an extremely challenging year, some might say EM fixed income has lost its shine, in the context of inflation at multi-decade highs around the world and with global interest rates heading to their highest since the global financial crisis. However, there are four important reasons to be optimistic.

EM structural reforms have died in the permacrisis but could revive in 2023

Structural reform is a powerful driver of the long-term investment case in emerging markets. However, it is sorely lacking at the moment as countries prioritise crisis management – Covid-19, high fuel and food prices, elevated sovereign debt across most of EM and climate emergencies – over long-term fundamentals. Which countries will find the political space to implement much-needed root and branch changes?

Emerging market income convergence slowed by post-pandemic scarring

The theory that output per capita tends to grow faster in poorer economies than in richer ones, leading to a convergence in per capita incomes over time, has enjoyed widespread currency in the literature on economic development in recent decades, but the pandemic has thrown a wrench into the convergence story.

Investor focus will turn to recession risk, but impact on EM bonds is ambiguous

As we see signs of disinflation and that the anti-inflation medicine is working, attention will shift to the outlook for slower growth and the risk of recession next year. We look at what that environment means for emerging market fixed income.

Drawn-out sovereign debt restructurings face common obstacles

Some sovereign debt restructurings seem to be taking a very long time. This has led to concerns that the Common Framework – an initiative rolled out by the G20 as a formal framework for debt restructurings for low-income countries – is not working, although restructurings outside the Common Framework are also subject to huge delays. What can be done amid fears of a rising wave of sovereign defaults?

In a multipolar world, military spending looks set to explode

Despite news headlines being dominated by stories of conflict and strife, global military spending, as a percentage of GDP, is close to historically low levels. But more belligerent military activity, notably by China, Russia, Iran and North Korea, is forcing US allies everywhere to respond. We look at the investment opportunities across the globe.

Predictions of Putin's demise are overplayed: Precedents from EM

The Russian invasion of Ukraine has not gone anything like to plan from the perspective of President Vladimir Putin, but the list of woes does not necessarily make regime change within Russia more likely.