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.”
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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.
Company%20Profile
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Know your Camel lingo
The bairaq is a competition for the best herd of 50 camels, named for the banner its winner takes home
Namoos - a word of congratulations reserved for falconry competitions, camel races and camel pageants. It best translates as 'the pride of victory' - and for competitors, it is priceless
Asayel camels - sleek, short-haired hound-like racers
Majahim - chocolate-brown camels that can grow to weigh two tonnes. They were only valued for milk until camel pageantry took off in the 1990s
Millions Street - the thoroughfare where camels are led and where white 4x4s throng throughout the festival
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Frida%20
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Avengers: Endgame
Directors: Anthony Russo, Joe Russo
Starring: Robert Downey Jr, Chris Evans, Scarlett Johansson, Chris Hemsworth, Josh Brolin
4/5 stars
THREE
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The Book of Collateral Damage
Sinan Antoon
(Yale University Press)
Why your domicile status is important
Your UK residence status is assessed using the statutory residence test. While your residence status – ie where you live - is assessed every year, your domicile status is assessed over your lifetime.
Your domicile of origin generally comes from your parents and if your parents were not married, then it is decided by your father. Your domicile is generally the country your father considered his permanent home when you were born.
UK residents who have their permanent home ("domicile") outside the UK may not have to pay UK tax on foreign income. For example, they do not pay tax on foreign income or gains if they are less than £2,000 in the tax year and do not transfer that gain to a UK bank account.
A UK-domiciled person, however, is liable for UK tax on their worldwide income and gains when they are resident in the UK.
if you go
The flights
Fly direct to Kutaisi with Flydubai from Dh925 return, including taxes. The flight takes 3.5 hours. From there, Svaneti is a four-hour drive. The driving time from Tbilisi is eight hours.
The trip
The cost of the Svaneti trip is US$2,000 (Dh7,345) for 10 days, including food, guiding, accommodation and transfers from and to Tbilisi or Kutaisi. This summer the TCT is also offering a 5-day hike in Armenia for $1,200 (Dh4,407) per person. For further information, visit www.transcaucasiantrail.org/en/hike/
HIJRA
Starring: Lamar Faden, Khairiah Nathmy, Nawaf Al-Dhufairy
Director: Shahad Ameen
Rating: 3/5
The Transfiguration
Director: Michael O’Shea
Starring: Eric Ruffin, Chloe Levine
Three stars
MEDIEVIL%20(1998)
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Why%20all%20the%20lefties%3F
%3Cp%3ESix%20of%20the%20eight%20fast%20bowlers%20used%20in%20the%20ILT20%20match%20between%20Desert%20Vipers%20and%20MI%20Emirates%20were%20left-handed.%20So%2075%20per%20cent%20of%20those%20involved.%0D%3Cbr%3EAnd%20that%20despite%20the%20fact%2010-12%20per%20cent%20of%20the%20world%E2%80%99s%20population%20is%20said%20to%20be%20left-handed.%0D%3Cbr%3EIt%20is%20an%20extension%20of%20a%20trend%20which%20has%20seen%20left-arm%20pacers%20become%20highly%20valued%20%E2%80%93%20and%20over-represented%2C%20relative%20to%20other%20formats%20%E2%80%93%20in%20T20%20cricket.%0D%3Cbr%3EIt%20is%20all%20to%20do%20with%20the%20fact%20most%20batters%20are%20naturally%20attuned%20to%20the%20angles%20created%20by%20right-arm%20bowlers%2C%20given%20that%20is%20generally%20what%20they%20grow%20up%20facing%20more%20of.%0D%3Cbr%3EIn%20their%20book%2C%20%3Cem%3EHitting%20Against%20the%20Spin%3C%2Fem%3E%2C%20cricket%20data%20analysts%20Nathan%20Leamon%20and%20Ben%20Jones%20suggest%20the%20advantage%20for%20a%20left-arm%20pace%20bowler%20in%20T20%20is%20amplified%20because%20of%20the%20obligation%20on%20the%20batter%20to%20attack.%0D%3Cbr%3E%E2%80%9CThe%20more%20attacking%20the%20batsman%2C%20the%20more%20reliant%20they%20are%20on%20anticipation%2C%E2%80%9D%20they%20write.%0D%3Cbr%3E%E2%80%9CThis%20effectively%20increases%20the%20time%20pressure%20on%20the%20batsman%2C%20so%20increases%20the%20reliance%20on%20anticipation%2C%20and%20therefore%20increases%20the%20left-arm%20bowler%E2%80%99s%20advantage.%E2%80%9D%0D%3Cbr%3E%3C%2Fp%3E%0A
The specs: 2018 BMW R nineT Scrambler
Price, base / as tested Dh57,000
Engine 1,170cc air/oil-cooled flat twin four-stroke engine
Transmission Six-speed gearbox
Power 110hp) @ 7,750rpm
Torque 116Nm @ 6,000rpm
Fuel economy, combined 5.3L / 100km
The specs
Engine: four-litre V6 and 3.5-litre V6 twin-turbo
Transmission: six-speed and 10-speed
Power: 271 and 409 horsepower
Torque: 385 and 650Nm
Price: from Dh229,900 to Dh355,000
SPEC%20SHEET%3A%20SAMSUNG%20GALAXY%20S24%20ULTRA
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Key developments in maritime dispute
2000: Israel withdraws from Lebanon after nearly 30 years without an officially demarcated border. The UN establishes the Blue Line to act as the frontier.
2007: Lebanon and Cyprus define their respective exclusive economic zones to facilitate oil and gas exploration. Israel uses this to define its EEZ with Cyprus
2011: Lebanon disputes Israeli-proposed line and submits documents to UN showing different EEZ. Cyprus offers to mediate without much progress.
2018: Lebanon signs first offshore oil and gas licencing deal with consortium of France’s Total, Italy’s Eni and Russia’s Novatek.
2018-2019: US seeks to mediate between Israel and Lebanon to prevent clashes over oil and gas resources.
Gully Boy
Director: Zoya Akhtar
Producer: Excel Entertainment & Tiger Baby
Cast: Ranveer Singh, Alia Bhatt, Kalki Koechlin, Siddhant Chaturvedi
Rating: 4/5 stars
AI traffic lights to ease congestion at seven points to Sheikh Zayed bin Sultan Street
The seven points are:
Shakhbout bin Sultan Street
Dhafeer Street
Hadbat Al Ghubainah Street (outbound)
Salama bint Butti Street
Al Dhafra Street
Rabdan Street
Umm Yifina Street exit (inbound)
What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
Zayed Sustainability Prize
MATCH INFO
Fixture: Thailand v UAE, Tuesday, 4pm (UAE)
TV: Abu Dhabi Sports
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• Scientists estimate there could be as many as 3 million fungal species globally
• Only about 160,000 have been officially described leaving around 90% undiscovered
• Fungi account for roughly 90% of Earth's unknown biodiversity
• Forest fungi help tackle climate change, absorbing up to 36% of global fossil fuel emissions annually and storing around 5 billion tonnes of carbon in the planet's topsoil
