Digitalisation and energy security are expected to drive investor returns over the next decade, as complex geopolitical and economic headwinds continue to shape the investment landscape in 2023, according to Swiss wealth manager UBS.
However, the investment landscape should become more constructive as 2023 evolves, with investors starting to anticipate interest rate cuts and higher growth, UBS said in its global investment outlook for the year ahead.
The US Federal Reserve has raised interest rates six times this year to rein in inflation, which is at a four-decade high. Earlier this month, the central bank raised its policy rate for a fourth consecutive time by 75 basis points as it aims to bring inflation down towards its target range of 2 per cent.
Given the dominance of the US dollar as an international reserve currency and many countries pegging their currencies to the greenback, central banks globally have followed suit and raised interest rates.
“We see a year of inflections ahead and investors currently sheltering from volatility need to plan when, and how, to rotate back into recovery themes in 2023,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
“Over the longer term, we see private markets as a way to grow exposure to secular trends of the decade ahead, notably in the areas of digitalisation and energy security.”
In October, the International Monetary Fund cut its global growth forecast for 2023 and warned of a cost-of-living crisis as the world’s economy continues to be affected by the war in Ukraine, broadening inflation pressures, a slowdown in China and supply chain disruptions.
While the IMF maintained its global economic estimate for 2022 at 3.2 per cent, it lowered next year’s forecast to 2.7 per cent, down 0.2 percentage points compared with an earlier forecast.
However, there is a 25 per cent probability that growth could fall below 2 per cent next year, the IMF said in its World Economic Outlook report.
Global economic uncertainty has also increased volatility in financial markets, causing them to fall into bear territory this year after a 13-year bull run.
“The decade of transformation has already brought significant changes to the global economic, political, societal and environmental picture,” UBS said in the report.
“But with central banks determined to bring inflation under control, a transition to green energy spurring investment, the era of security driving public spending on infrastructure and R&D, and the digitalisation of business models gaining momentum — all amid lower asset class valuations — a more positive secular backdrop remains possible.”
UBS’s core recommendation for investors in 2023 is to tap into defensive sectors, such as consumer staples and health care, and value stocks, which typically offer generous dividends, to offset high inflation.
Later in the year, opportunities may arise for investors to buy cyclical and growth stocks if the cost of living slows and global growth picks up, the bank said.
Investors should also seek to earn more “predictable returns from income strategies” against the uncertain economic backdrop, while high market volatility can also offer a means of generating income, UBS said.
“Evidence that inflation is falling sustainably, an end to Fed rate hikes and anticipation of potential rate cuts should present a more supportive backdrop for markets as 2023 progresses,” UBS said.
“So, while we advocate a defensive posture as we enter the new year, it is also important for investors to stay invested in line with longer-term plans and retain upside exposure so that portfolios do not get left behind as markets attempt to anticipate a turning point.”
Investors could also find shelter in safe-haven currencies in the coming months, including the US dollar and Swiss franc, UBS said.
As the world’s reserve currency, the dollar has experienced unprecedented strength in 2022, the bank added.
The US Dollar Index — a measure of the greenback against a weighted basket of major currencies — rose 16 per cent in the first 10 months of the year, putting it on course for its biggest annual gain yet.
“In the near term, we think this strength will persist,” UBS said.
“We expect broad market volatility to continue, leading investors to seek safe havens like the dollar, and the Fed remains more aggressive at raising rates than other major central banks.”
By June 2023, UBS has forecast the EUR/USD and GBP/USD to reach 0.98 and 1.13, respectively.
The outlook, however, for the pound remains negative, dragged down by political turmoil and weak economic growth that has led to questions about the UK as an investment destination, UBS said.
“After a prolonged period of instability, it is likely to take a number of years before the pound can regain more ‘normal’ valuation levels,” it added.
“By the end of 2023, we expect the pound to trade at 1.21 versus the US dollar.”
___________
Watch: UK's finance minister says he is focused on bringing down inflation as economy shrinks
For investors looking at the next 10 years, the prioritisation of energy, food and technological security by governments and businesses will be a key driver of major sectors and could provide investment opportunities in several areas, including smart agriculture.
The outlook for long-term sustainable investments is also strong despite a disappointing performance in 2022, UBS said.
“The past year has shown why investors need to diversify across sustainable investment themes, including value-orientated themes as well as growth themes,” it said.
Meanwhile, investors will enter 2023 with many questions about the strength and purpose of the political and financial institutions that support global markets, according to Iqbal Khan, president of UBS Global Wealth Management.
“Yet, provided the world can avoid another geopolitical, financial or epidemiological accident, we do see a more favourable backdrop for markets emerging as the year evolves,” Mr Khan said in the report.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE currency: the story behind the money in your pockets
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
UAE currency: the story behind the money in your pockets
The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%201.5-litre%204-cylinder%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ECVT%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E119bhp%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E145Nm%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EDh%2C89%2C900%20(%2424%2C230)%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3Enow%3C%2Fp%3E%0A
Avatar%3A%20The%20Way%20of%20Water
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3EJames%20Cameron%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%20%3C%2Fstrong%3ESam%20Worthington%2C%20Zoe%20Saldana%2C%20Sigourney%20Weaver%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E3.5%2F5%3C%2Fp%3E%0A
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20OneOrder%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%20March%202022%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Tamer%20Amer%20and%20Karim%20Maurice%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Cairo%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%20%3C%2Fstrong%3E82%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20Series%20A%3C%2Fp%3E%0A
Godzilla%20x%20Kong%3A%20The%20New%20Empire
%3Cp%3E%3Cstrong%3EDirector%3A%20%3C%2Fstrong%3EAdam%20Wingard%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStarring%3A%20%3C%2Fstrong%3EBrian%20Tyree%20Henry%2C%20Rebecca%20Hall%2C%20Dan%20Stevens%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%204%2F5%3C%2Fp%3E%0A
The specs: 2018 Audi R8 V10 RWS
Price: base / as tested: From Dh632,225
Engine: 5.2-litre V10
Gearbox: Seven-speed automatic
Power: 540hp @ 8,250rpm
Torque: 540Nm @ 6,500rpm
Fuel economy, combined: 12.4L / 100km
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Dengue%20fever%20symptoms
%3Cul%3E%0A%3Cli%3EHigh%20fever%3C%2Fli%3E%0A%3Cli%3EIntense%20pain%20behind%20your%20eyes%3C%2Fli%3E%0A%3Cli%3ESevere%20headache%3C%2Fli%3E%0A%3Cli%3EMuscle%20and%20joint%20pains%3C%2Fli%3E%0A%3Cli%3ENausea%3C%2Fli%3E%0A%3Cli%3EVomiting%3C%2Fli%3E%0A%3Cli%3ESwollen%20glands%3C%2Fli%3E%0A%3Cli%3ERash%3C%2Fli%3E%0A%3C%2Ful%3E%0A%3Cp%3EIf%20symptoms%20occur%2C%20they%20usually%20last%20for%20two-seven%20days%3C%2Fp%3E%0A
Racecard
%3Cp%3E1.45pm%3A%20Bin%20Dasmal%20Contracting%20Cup%20%E2%80%93%20Maiden%20(PA)%20Dh50%2C000%20(Dirt)%201%2C200m%3Cbr%3E2.15pm%3A%20Al%20Shafar%20Investment%20Cup%20%E2%80%93%20Maiden%20(TB)%20Dh60%2C000%20(D)%201%2C200m%3Cbr%3E2.45pm%3A%202023%20Cup%20by%20Emirates%20sprint%20series%20%E2%80%93%20Handicap%20(TB)%20Dh84%2C000%20(D)%201%2C200m%3Cbr%3E3.15pm%3A%20HIVE%20Cup%20%E2%80%93%20Handicap%20(TB)%20Dh68%2C000%20(D)%201%2C400m%3Cbr%3E3.45pm%3A%20Jebel%20Ali%20Mile%20Prep%20by%20Shadwell%20%E2%80%93%20Conditions%20(TB)%20Dh100%2C000%20(D)%201%2C600m%3Cbr%3E4.15pm%3A%20JARC%20Cup%20%E2%80%93%20Maiden%20(TB)%20Dh60%2C000%20(D)%201%2C600m%3Cbr%3E4.45pm%3A%20Deira%20Cup%20by%20Emirates%20Sprint%20series%20%E2%80%93%20Handicap%20(TB)%20Dh76%2C000%20(D)%201%2C950m%3C%2Fp%3E%0A
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3ESmartCrowd%0D%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2018%0D%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3ESiddiq%20Farid%20and%20Musfique%20Ahmed%0D%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinTech%20%2F%20PropTech%0D%3Cbr%3E%3Cstrong%3EInitial%20investment%3A%20%3C%2Fstrong%3E%24650%2C000%0D%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%3C%2Fstrong%3E%2035%0D%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3ESeries%20A%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EVarious%20institutional%20investors%20and%20notable%20angel%20investors%20(500%20MENA%2C%20Shurooq%2C%20Mada%2C%20Seedstar%2C%20Tricap)%3C%2Fp%3E%0A
How to turn your property into a holiday home
- Ensure decoration and styling – and portal photography – quality is high to achieve maximum rates.
- Research equivalent Airbnb homes in your location to ensure competitiveness.
- Post on all relevant platforms to reach the widest audience; whether you let personally or via an agency know your potential guest profile – aiming for the wrong demographic may leave your property empty.
- Factor in costs when working out if holiday letting is beneficial. The annual DCTM fee runs from Dh370 for a one-bedroom flat to Dh1,200. Tourism tax is Dh10-15 per bedroom, per night.
- Check your management company has a physical office, a valid DTCM licence and is licencing your property and paying tourism taxes. For transparency, regularly view your booking calendar.
TOURNAMENT INFO
Women’s World Twenty20 Qualifier
Jul 3- 14, in the Netherlands
The top two teams will qualify to play at the World T20 in the West Indies in November
UAE squad
Humaira Tasneem (captain), Chamani Seneviratne, Subha Srinivasan, Neha Sharma, Kavisha Kumari, Judit Cleetus, Chaya Mughal, Roopa Nagraj, Heena Hotchandani, Namita D’Souza, Ishani Senevirathne, Esha Oza, Nisha Ali, Udeni Kuruppuarachchi
Yuki Means Happiness
Alison Jean Lester
John Murray
EMERGENCY PHONE NUMBERS
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
