What I Look Forward to in 2023

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2022 has been a turbulent year for many investors, me included.  For the whole of 2022, my portfolio has fallen by 16.8%.  As we enter 2023, what are some of my expectations and speculations for my portfolio moving forward?  Do note that this is purely speculative on a personal level (and based on many analyst reports, articles etc. Point to note, Chicken Genius Singapore predicted that the bottom will be at around Q1 and Q2 2023) and it is definitely not any form of buy/sell/hold recommendations for anyone.  

Personally, I speculate that 2023 may be a flat to slight negative year for my portfolio, ending the year down by -2.5 to -10%.  I made this speculative conclusion based on the following reasons.

1)    Interest Rate Remains High Through 2023

Jerome Powell has already mentioned that FED will do that job to suppress inflation back to 2% levels.  As of December 2022, November CPI has fallen to 7.1%, but that is still way above their target levels.  As such, I believe that even though the extent of increase in interest rate will slow down, but the terminal rate will remain elevated at around 5% for now.  Mathematically and statistically, I think that by 4th quarter 2023, CPI will fall substantially to 3-5% year-on-year, provided no occurrence of any black swan event (due to the high base this year).  Give and take a couple more months before FED pivots, I think market in 2023 will be moving sideways with downward biasness, with intermittent violent fluctuations through the year.  For my US Growth portfolio, as it is tech-heavy, downward pressure persists.  Short-term selling pressure for tech companies like Tesla, Meta, Google and even Apple may persist, so I believe there may be minimal optimism, or even full gloomy pessimism for the US market in at least for the first half of 2023.  How things will turn out in the second half of 2023 remains to be seen.  Nearer to home, for my Dividend Portfolio, as it remains REITs-heavy, I do not see much optimism for the portfolio as well.  Disregarding their share price volatility, I will be very pleased if the dividends collected for 2023 can maintain at similar levels as 2022.   

2)    Possible Mild Recession in 2023

Many banks like JP Morgan, Citibank and Bank of America predicted that US will fall into a mild recession in 2023, while unemployment rate may rise to around 5%.  This will definitely pose downward pressure for the individual stocks, as companies' earnings will be negatively impacted in such times.  However, as the recession is unlikely to be severe, I think the fall should be limited.  In addition, even if the situation gets out of hand and the economy cracks, FED will have interest rates as a means to maneuver through tough times, by lowering interest rates to support the economy when needed.  Nonetheless, how quickly or how flexible/nimble is the FED going to respond, that is something I won't know.  Will they do what they needed too little too late when the time comes (like their transitory inflation talks in 2021 that resulted in spiraling inflation into 2022), causing the negative impact to amplify?  It depends entirely on FED.  All I can do is to be better prepared with some cash on hand, and remain discipline with my DCA.

As of now, these are the 2 main factors that will affect my portfolio in 2023, barring any other unforeseen circumstances.  I hope my portfolio can continue to survive through 2023 and prosper in 2024!  Will revisit this post at the end of 2023!  Barista FIRE, here I come...!

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