Trading outlook 2023: stock, supply chain, global cargo and more

 

As 2022 draws to an end there is a lot of anxiety for traders. Many are wondering what 2023 will offer and if there will be any improvements from the current year. The pandemic had a huge impact on markets this year leading to slow growth. The slow growth in the 4th quarter is expected to spill into 2023.

 

Things are not expected to pick up immediately in 2023. It will take some time for things to start improving. You can expect things to get worse before getting better. People can expect prices to go high with fewer sales. Interesting fact, the only thing that is set to improve is the price of shipping containers next year. As there is more demand, shipping costs are expected to reduce. What other changes can you expect to see in trading in 2023?

 

Contents:

- Recession of the stock market

- Currency rates

- Slow trade growth

- Reduced congestion

- Increase in oversupply

- Drop in container prices

- Slow down in supply chains

- Shortage in labor and resources

- Changing demand in commodities

- Final thoughts

 

1. Recession of the stock market

2022 came with a lot of shocking changes in the stock market industry. There was a decline in growth that was significant in the second half of the year. Again, this occurred as a result of the changes across the world.

 

Things started picking up towards the end of the 4th quarter. The changes may continue as 2023 goes by. Fundamentals are likely to keep deteriorating as the financial industry becomes more strict with monetary policy. You could also see a higher rise in the number of unemployed people, you can expect a mild recession. The recession won't be as high because of inflation.

 

There could be a reduced demand for stocks as well. Most people have already spent most of their savings from the pandemic; the earning capacity means stock prices will have a slight reduction to encourage investments.

 

For example, in November, the price target for the S&P 500 dropped and was around 3,817. It is predicted that the double drop should hit stocks at the beginning of 2023. However, the FTSE 100 has remained nearly the same for the whole year. There won't be a bug change next year. These changes will make the market volatile. The duration of the recession will all depend on how quickly different governments may react. One country that may perform better than others in Japan. That is because of more solid earnings and a low rate of inflation.

 

The economy reopening after covid-19 led to a more resilient market. Other markets that will see some growth include the UK. The Chinese market is projected to have a growth of up to 17% in the last quarter of 2023.

 

2. Currency rates

Whenever there are shifts in the currency, Fed tries to regulate things in order to prevent further inflation. This has been the case for the last 10-20 years. As you make an investment, consider the currency exchange. With inflation on the rise, Fed has tightened its policies.

 

The risk of a recession in the US markets is another thing to look out for when considering currencies. The Fed is likely to hikes to 25 bp by the end of the first quarter of next year. Afterward, the rate of hikes will slow down. Whenever there are hikes the rules are tighter.  Tighter financial conditions create a favorable environment for recession. Europe is going to have a mild recession by the end of the first quarter. The same may happen for the US market but towards the end of the year.

 

3. Slow trade growth

The growth of the global market this year has been slow. Regardless of the economical and political effects, the market has held up well. However, while most expect growth to pick up, that won't be the case in the first two quarters of 2023.

 

If you compare 2022 and 2021, the latter had fewer sales. As the world opened up with fewer travel restrictions there were far more sales. When markets start recovering, you can expect to see a slow growth of about 4% in the later months of the coming year.

 

4. Reduced congestion

Because there was more demand after the end of the lockdown, there has been an accumulation of containers at ports. One thing to look out for is reduced demand. There was a rise in demand which led to a record high in the congestion of containers seen at US ports. This was predominantly in the first half of the year. There was a gradual reduction in demand as the year progressed.

 

Once the world opened up after COVID-19 there was an increase in the speed at which containers were cleared. Also, traders started ordering inventory early on thus avoiding the peaks that occur during the holiday season. Another factor that has led to less congestion is that customers are reducing expenses. They are spending less on goods than during the pandemic.

 

Even if congestion is reduced, it will take some time. There will still be queues of fleets at ports across the world. More than 10% of goods will still be pending by the third quarter.

 

5. Increase in oversupply

The cut in expenses will likely be the same in 2023 if not worse. As the world is preparing for a coming recession, traders should be on the lookout. The expected global growth is less than 1.5%. Things that contribute to slow growth include:

- recessions

- reduced supply

- reduced resources

- reduced labor

- ongoing energy crisis

6. Drop in container prices

Because there will be a shortage of demand, container prices will become cheaper. The drop in container prices marks the general reduction in transportation costs across the world. Spot rates will go down as more people opt for long-term contracts.

 

The second half of the year showed a rise in numbers on long-term contracts. This has also been slowly going down because of the reduction in shipments. There are more companies, especially small ones offering shipment at lower costs. These usually work with spot rates. Rates in bulk have shown a slight improvement since the pandemic. The price of tankers has also plummeted. This is because of the increased cost of oil and gas.

7. Slow down in supply chains 

By mid-2021, there was a decline in the supply chain. This has continued to plummet in 2022 and will continue next year. Traders should anticipate this to go further down by the end of 2023.

 

The increasing cost of energy is a factor that will greatly affect supply chains. Governments will try to support companies, especially with energy costs. However, this won't be enough to keep things going. Companies striving to stay at the stop will have to deal with the rising overall costs of running a business in 2023.

 

8. Shortage in labor and resources

The number of sales is going down. Also, the cost of transportation, recession, and energy costs are likely to cause a lot of strikes in the coming year. This may ultimately create a shortage of labor and resources.

 

The strikes are more likely to impact the transportation industry than any other. The threat of another lockdown in China in the first part of 2023 is another possible cause of the reduction in labor. However, the prediction of Morgan Stanley says China will recover its economy in the middle of 2023. But there is always a possibility that:

- Further lockdown will slow down the shipping process;

- Fleets will stay longer at ports;

- Goods staying longer at ports, there will be a reduction in the number of products being sent out of factories.

9. Changing demand for commodities

At the beginning of the year, prices of oil were expected to remain steady. This quickly changed with the onset of the war. The price shifted from $90 per barrel to $104 per barrel. In 2023, the price should be reduced by $8. By the 3rd quarter, the price is predicted to see a further reduction as oil production improves.

 

The price of oil may start increasing toward the end of 2023. But it is expected to average $90 per barrel for most of next year. Even though the demand for most commodities will reduce, it is the opposite for oil. The demand for oil will increase but fail to contribute to the growth of the global economy. The rise in demand for oil can be attributed to the world gradually going back to pre-covid 19 times with more vehicles on the roads and more flights.

 

Other commodities such as base metals will have a lower demand, however:

- Prices are going to start picking up as 2023 grows to an end;

- Precious metals on the other hand are going to maintain a positive value throughout the year;

- As the production will reduce, it will only push prices further up;

- By the end of 2023, gold will cost more than $1,800 per Troy;

- As the yields go low and demand increases the price of silver will also rise.

Final thoughts

As the statistics showed, more people are trying to reduce their expenses after buying more during the pandemic. The demand and supply chains will most probably decline but some experts predict that the market will recover in mid-2023. Resources will also become more expensive, especially energy. Companies will have to spend more money to stay competitive. Containers on the other hand are predicted to become cheaper due to reduced demand.

 

Some people are talking about 2023 it is going to be great for the stock market. But we can see the 30% decline that’s coming in the first quarter. The global trade market has been slowing down for some months now. It will continue declining as 2023 approaches. There is no evidence that 2023 will come with increased growth in trade markets.

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