If you missed part one of this two-part recap, then make sure to check that out first.
Because while 2022 has been a rocky year, 2023 is already presenting some interesting developments. And more importantly, it should see us shift away from a lot of the big topics that defined this year…
For example, inflation seems unlikely to be a sticking point for the foreseeable future. Now that rising interest rates are finally bringing it under control, the focus on CPI data is unlikely to be as dramatic.
Having said that, expect plenty of Fed and RBA watching still. The only difference is that this time everyone is trying to predict when they’ll start cutting, not raising rates.
Crypto, like inflation, is another trend I’m not expecting to get much mainstream attention in 2023. I think the ‘winter’ of low prices and low engagement will continue despite many exciting behind-the-scenes developments.
All of which should eventually culminate in the next big boom, whenever that may be…
So, instead, let’s turn to some topics that are more likely to capture investors’ attention.
Energy transition evolves
One of the trends that did play out this year and that I believe will continue to be the centre of discussion in 2023 is energy.
Oil and gas markets, for example, are finally acclimating to a world with restricted Russian supply. And while some anticipate this could rebalance things next year, I wouldn’t count on it.
S&P Global’s outlook, for instance, expects Chinese and Indian demand to put more pressure on producers:
‘The S&P Global Commodity Insights Energy Outlook 2023 presumes China’s total energy demand will increase by 3.3 million barrels of oil equivalent per day, up from virtually no growth in 2022. This will represent 47% of global energy demand growth next year.
‘While China’s imports will likely return to a growth pathway, India has been a strong demand performer over the past year, with imports of oil and coal notably higher year-on-year, as it has absorbed significant volumes or Russian supply that would have gone to Europe.’
At the same time, the green transition to new renewable fuels is also accelerating.
Beyond demand for wind and solar, expect to see talk about hydrogen continue, as well as the strong growth of electric vehicles and battery storage solutions.
Perhaps the biggest energy story of all, though, is nuclear fusion. Because while this futuristic power solution is still largely theoretical, a breakthrough out of the US earlier this month could kick off huge investment and interest in this burgeoning industry.
Apple reinvents VR and the metaverse
Can you recall back in 2007 when Apple first unveiled the iPhone?
The buzz and demand they created with the simple and (relatively) slick smartphone was astounding. It was a true game changer for the mobile market, and it propelled Apple to become the biggest public company in the world.
To this day, the iPhone is still their bestselling product. But, in 2023, I think we may begin to see that shift.
Don’t get me wrong, iPhones will still be in high demand, but it’s Apple’s newest product that I’m more interested in.
If the rumours are true, Apple’s mixed reality (virtual and augmented reality) should be coming sometime next year. Mass production is apparently slated for March, and a reveal could come quickly after.
This means after roughly eight years of apparent development, we may finally see what Apple has to offer. And as is so often the case with their products, it seems like a pretty sure bet that it could be another game changer.
In fact, don’t be surprised if it kicks off another rush to build the metaverse. Because as abstract as the concept and technology still seem to the masses right now, it is coming.
There are few better equipped than Apple to do exactly that…
More stuff, more materials
Last but certainly not least, I have to mention commodities.
Despite concerns over recessions, slowing growth, and trade disputes, I think 2023 will be a return to form for much of the world’s supply chain. This includes an ongoing effort to diversify away from China.
As a result, I wouldn’t be shocked to see a lot more spending on infrastructure and overall production. Whether there will be actual demand for the fruits of this labour, I don’t know.
That is far trickier to anticipate.
However, I do think the demand for raw materials and especially metals will remain strong. All of which is great news for our vast resource industry.
Part of this, of course, ties into the energy theme, but I expect it to go beyond that as well. Critical minerals are still in desperate demand for specialised markets. And I can’t see that coming to an end all that quickly.
This is particularly pertinent given the government’s hopes to foster downstream economic benefits. As our own Resources minister recently stated:
‘“By leveraging our competitive advantages, the critical minerals we mine and refine here, can help us move up the value chain and into downstream processing, helping to create new opportunities and high-paying jobs across Australia, including in our regions,” she said.
‘Australia already produces almost half of the world’s lithium, is the second-largest producer of cobalt and the fourth-largest producer of rare earths.’
That is why come next year, I expect we’ll see plenty of commodities interest.
I guess we’ll have to wait until 2023 to see how right or wrong I am…
So, until then, have a very merry Christmas.
Regards,
Ryan Clarkson-Ledward,
Editor, Money Morning
PS: Due to the festive season, Money Morning will have a modified publishing schedule next week. Expect to see special editions of Money Morning on Monday, Wednesday, and Friday next week — where you will get a glimpse at what our editors have been telling their paying subscribers recently on how to best navigate these sensitive market conditions. We will return to our usual daily publishing schedule on Tuesday, 3 January.