2023 is finally here, and now is the time to begin assessing your financial plans. In this article, there is an analysis of the current market, including the inflation rate, the possibility of a recession, the best investments, and other relevant data. Read on to discover what is expected in fiance for 2023 and the best way to prepare financially.
Planning For Inflation
Inflation has been at an all-time high, with the September 2022 consumer price index (CPI) rising 8.2% over the last year, as indicated by Northern Trust. This increase can be seen in everyday purchases like groceries, gas, and plane tickets. For the upcoming year of 2023, inflation is expected to decrease from its current 8.0% rate at the end of 2022 to 3.5% by the end of 2023. As the economy continues to slow down, this will cause the cost of goods and services to level out as well. For this reason, it is important to take inflation into consideration when planning financially. Although there are still notably high prices on necessities such as shelter, airfare, food, and auto repair, they should eventually normalize.
Considering Risk Assessment
Feeling anxious about your money in a volatile market is understandable. However, it is important to remember that any form of investing involves some element of risk. Reports suggest that market volatility may continue into 2023. As such, it is crucial to search for an advisor who is open and clear about the risk involved. According to a 2020 BlackRock study, two-thirds of advisors regularly demonstrate how a portfolio’s risk and returns align with an individual’s risk profile and goals. In addition, over 70% of advisors mentioned that discussing risk with their clients helped them stay invested during turbulent times. Therefore, make sure you find a financial advisor who is willing to openly discuss risk before embarking on your next venture.
Preparing For A Shallow Recession
Consumers are currently speculating as to whether a recession will occur in 2023, with financial experts viewing it as a 50/50 possibility within the next 12 months. However, it is crucial to understand that not all recessions are equal; recessions caused by the Federal government are usually shorter and less severe than structural recessions, like the Global Financial Crisis of 2007-2008. In 2023, many experts are predicting a “brief and shallow” recession. This means that the recession won’t last much longer than a year and will be confined to certain parts of the world. To better prepare for any type of recession, it’s important to create a budget and an emergency fund. Additionally, it’s important to continue making current payments and debt repayments. Finally, it’s beneficial to plan ahead for the possibility of unemployment that can accompany a recession; make sure you know what you’d do if you were to get laid off.
Investing in Real Assets
Real assets are now a major part of any financial portfolio, with global natural resources, real estate, and listed infrastructure as the main components. It is expected that all real assets will perform well over the next five years, providing an opportunity to diversify your portfolio and generate higher returns than traditional stocks. If you are willing to take on some risk and have a long-term investment timeline, natural resources may be an appropriate addition to your portfolio. Natural resources can provide a safeguard against potential inflation. A financial representative can assist you in determining if investing in natural resources is the best option for you.
Transitioning to Renewable Energy
As more governments recognize the importance of renewable energy in achieving energy security, the emphasis on high fossil fuel prices and national energy security opens up potential investment opportunities in renewables and energy conservation. We anticipate a rise in both private and public investment in these areas.