2022 has come to an end as central banks took the sharpest rate hikes in history, some commodity prices broke records on the back of the Russia-Ukraine war and inflationary pressures around the world reached historic levels.
Despite the actions taken by central banks over the past year, it is noted that while uncertainties remain high in developed economies, global markets could be volatile.
In 2022, the US Federal Reserve (Fed) raised interest rates to a 15-year high of 4.25-4.50 percent, and the European Central Bank (ECB) raised the refinancing rate to a 14-year high 2.50 percent.
With the Russia-Ukraine war beginning in February last year, the price of Brent oil, although falling after $131 a barrel, ended the year at $84.3, up 8.4 percent.
The gold ounce price closed the year at $1,824.6, down 0.3 percent, after fluctuating in the range of $1,615 to $2,070.
“BAD SCENARIO WAS NOT REALIZED”
IS Investment International Capital Markets Manager Shant Manukyan said in his statement that the Fed’s rate hikes will clearly have an impact in the second half of the year and the recession in the US will be the main topic.
Recalling that the stagflation that was rampant early last year has not materialized, Manukyan said that central banks in the US and Europe have started raising interest rates due to inflationary pressures, even though the price of oil rose to $130 , despite being central Banks continued their easy monetary policy due to less pressure from the Japanese and Chinese sides.
Manukyan explained that from this point of view, the worst-case scenario did not materialize and said: “We can say that the losses in the stock markets are relatively limited. The same goes for the bond market,” he said.
“The main topic will be the recession”
Noting that the expectation that the Fed will raise rates enough to plunge the country into recession remains and that the bank has already expressed this implicitly, Manukyan stated that he does not think it will a recession will come in the first half of the year look at 2023 broadly.
Stressing that rate hikes will have a very significant impact in the second half of the year, Manukyan said, “Both the deterioration in the unemployment rate in the second quarter of the year will come quickly, and we will see a fall in inflation.” So the recession will now be the main issue.”
“THE PATH TO INFRASTRUCTURE INVESTMENT GROWTH”
Manukyan said inflation will not drop to 2 percent in either the US or Europe, saying central banks could remain cautious even if inflation falls to 4-5 percent.
Manukyan pointed out that there is a lot of uncertainty about what Europe will use instead of Russian natural gas, saying that any option other than Russian gas will pose a challenge as it imposes more costs on European industry.
Manukyan said China’s growth will accelerate this year and doesn’t expect it to create a new trend in commodity prices.
Manukyan explained that the only way to grow in a year when domestic and external demand will be weak is through infrastructure investments, but a package that will affect growth will not be announced like in 2009.
‘Real rate hike ended sharply’
Noting that the depth of the recession is important globally, Manukyan said, “If we look at current stock prices, I don’t think a very deep recession is priced in.”
Noting that the rise in real interest rates appears to be largely at an end, Manukyan said, “When the rise in interest rates stops and there is a recession, precious metals should do better.”
“OTHER CENTRAL BANKS WILL FOLLOW THE FED”
Strategist Özgür Hatipoğlu also noted that a recession could be looming in the second half of the year, saying: “It is necessary to mention the final interest rate issue here, which is an important question mark. While the swap market is pricing in below 5 percent, Fed Committee members expect 5.25 percent. My expectation is that it will be realized in the range of 5.25 to 5.50 percent.” gave his assessment.
Noting that the importance of expectations regarding the impact of central bank actions has increased over the past year, Hatipoğlu recalled that since the 2008 crisis, global central banks have lagged behind the Fed by a step, which made the management of the market expectations.
From this point of view, Hatipoğlu stated that he expects other banks to follow after the Fed stops raising interest rates, saying, “The timing of that will depend on the trajectory of inflation, employment and growth in the US.”
“MONETARY POLICY CANNOT BE INITIATED”
Hatipoğlu stated that the fall in inflation is still far from the central banks’ targets and that a significant fall might occur as the interest rate stays higher for a longer period and inflation dampens the demand side, Hatipoğlu said the second half of the year will be most likely experience noticeable changes in monetary policy.
Hatipoğlu explained that in the second half of the year, depending on the flow of data, it can be seen that inflation has come down and the recession that is now just around the corner is moving into homes. If, on the other hand, one assumes that monetary policy inflation will recede, an easing is inevitable.
‘THE REDEMPTION WILL BE POSSIBILITY TO PURCHASE’
Hatipoğlu stressed that precious metals should have been included in portfolios since November 2022, saying: “Reducing key interest rates is the most fundamental factor that will lead to the rise of gold and other precious metals. From now on, any pullback will be a buying opportunity,” he said.
Noting that oil is a very contentious issue, Hatipoğlu stressed that the oil market is a battleground in which OPEC and Arab countries, who want to raise the price, face the US, who want to lower the price, and Russia, the wants to sell, crash his oil at the highest possible price.
In addition, Hatipoğlu stated that a drop in demand due to the global recession could be added in response to the opening up of China and the possible increase in demand: “Therefore, it is estimated that the band movement can continue with a maximum of 2-week rallies and sell-offs based on the short-term News flow in the oil market. That range appears to be limited to $70 below and $95 above.”
“THE EFFECT OF CASE NUMBER IN CHINA WILL BE LIMITED”
Hatipoğlu stated that he thought the war between Russia and Ukraine would continue but that no nuclear weapons would be used and that he expected the impact of the war to be minimized after this winter.
Hatipoğlu stated that the rising number of cases of the epidemic in China will only have a limited impact on market prices:
“As a result, it would be reasonable to believe that downside risks in the stock market are even higher in 2023, particularly for growth stocks. Industrials, healthcare and oil stocks appear to outweigh the portfolios. On the commodities side, I think there are notable opportunities in soft commodities. Energy, as I mentioned above, is in the middle. While precious metals offer opportunities, base metals are far from my favorite for a recession” (AA)
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