February 9, 2023

As Reality Bites, Opportunities Arise – Global Outlook & Strategy Q1, 2023

Global Strategy

A dose of reality.

The total loss from the peak in global Crypto markets is estimated to be $2.2 trillion.
The total loss from peak of the FAANGS is $2.9 trillion (top 5 US technology stocks: Apple,
Amazon, Netflix, Alphabet & Meta).

To put this in perspective, the total market capitalisation of the Australian Equity market is $2.3

The reality of rampant speculation and excessive valuations, aided and abetted by surging money
supply compliments of Global Central Banks, combined with huge fiscal spending and handouts
from Governments, has finally hit home via substantial losses in risk assets and surging inflation.
After supercharging asset values and keeping loose policy for too long, Central Banks are now
scrambling to tame inflation at the expense of growth in the global economy.

It’s going to be a nasty start for 2023. A recession in major economies is probable, risk assets
will need to adjust further to the new reality of lower earnings and higher financing costs. After
any period of excess speculation, dislocation in financial markets arrives in unknown places.


• The tightening of financial conditions through the rapid rise in official interest
rates has had large negative impacts on financial assets in 2022. In 2023 we
will learn the impact on the real economy.

• 2023 will be a year of price discovery for private assets including real estate
and private credit.

• There may be further volatility as the global economy weakens; however,
2023 should present some attractive opportunities for portfolios, particularly
in distressed credit, deep value equities and secondary assets where holders
require liquidity.

• Government bonds have moved from being undesirable to being attractive as
yields have risen.


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