Forecasts and alternatives: How will the financial markets develop in 2023?

Forecasts and alternatives: How will the financial markets develop in 2023?

According to a report by www.dasinvestment.com, the prevailing opinion is that interest rates in the USA will fall noticeably this year. The Fed's monetary policy is currently pricing in six to seven interest rate cuts. ECB President Christine Lagarde is likely to follow Powell a little later and less energetically, as the European central bank also started raising interest rates later. CME Group's Fed Watch tool suggests interest rate cuts may not happen as quickly as investors would like. Let's analyze together what impact this could have on the financial industry.

Powell is keeping his feet still for now

The Fed's key interest rates are currently 5.25 to 5.5 percent. According to the Fed Watch tool, the probability of an initial interest rate hike of 25 basis points is only 17.5 percent. In addition, the excellent economy in the USA also speaks against rapid and aggressive interest rate cuts. The American economy grew at an annualized rate of 3.3 percent in the fourth quarter of 2023, and 223,000 new non-farm jobs were created. This has an impact on consumer sentiment and overall economic growth.

The US economy is booming

The robust economic indicators in the USA indicate that a hard landing for the US economy is far away. The good situation on the labor market has a positive effect on consumer sentiment. It also appears that as long as the inflation target of two percent has not yet been reached and as long as the economic indicators remain positive, an initial interest rate cut is not yet necessary. If China steers its economy towards recovery through monetary and fiscal policy measures, this should also be reflected in rising raw material prices. With increasing economic growth and difficult conditions for achieving the inflation target due to rising raw material prices, the Fed is likely to be cautious about cutting interest rates.

It is important to recognize that these uncertainties could impact stock markets and that dividend investing and sectors such as pharmaceuticals and non-cyclical consumer spending may provide the best returns. In such a scenario, the “Tech Titans” from the tech sector could also become more attractive compared to other investments. The dynamic situation on the market therefore requires a prudent investment strategy and constant monitoring of economic data in order to identify possible promising securities.