Authored by Global X ETFs
What themes should you be incorporating into your SMSF in 2023? Global markets are abuzz speculating how the year will unfold, with analysts predicting everything from a global recession to an end-of-year equity rally. Diversification is key in times of volatility, so here are three investable ideas from gold being back in vogue and growth in emerging markets to going greener with decarbonisation.
1. Gold is back in Vogue
Inflation, rate hikes, and recession risk could combine in 2023 to make for a nasty mix of market conditions. Amid the uncertainty, many investors appear to be returning to a proven safe haven – gold. Although the precious metal didn’t shine throughout the pandemic, prices remained relatively steady while other assets such as equities took a significant hit. In late 2022 gold prices started to tick up as investors sought out a hedge against inflation in a reliable store of value (which is relatively uncorrelated to other assets).
To sweeten the gold story heading into 2023, demand for physical gold is on the rise. Central banks around the world are buying up physical gold in response to ongoing geopolitical tensions and consumers are spending more on discretionary items and the jewellery market stands to benefit – all the while, pushing the price of gold higher.
2. Growth in Emerging Markets
Emerging markets took a significant hit in 2022 as funds fled to more risk adverse assets. Despite looking a little battered and bruised, markets such as India have the potential to prosper as economic conditions and market sentiment improves. Additionally, India and other emerging markets are likely to benefit from the weaker US dollar and see more capital enter the currently unloved area.
India is one of the world’s largest emerging markets and will benefit locally from a growing population. According to The Economist, India’s population will overtake China’s in April 2023 and will be almost 50% bigger than China by 2064. As such, India’s GDP is set to grow alongside its population – resulting in a stronger economy and investment potential.
3. Going Greener with Decarbonisation
Decarbonisation is front of mind for many businesses and governments across the globe as they aim to reach net-zero by 2050. Carbon Trading Schemes are among the most regulated and proven methods to reducing emissions as they disincentivise pumping pollution into the atmosphere by effectively putting a price of carbon emissions.
The European Union runs the world’s largest Emission Trading System and made a ‘Green Deal’ during the back end of 2022 to slash emission further by significantly reducing the number of carbon allowances available for purchase. As a result, carbon prices should rise in 2023 and beyond thanks to favourable supply and demand dynamics.
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