Preparing your 2023 strategy
Happy new year Stratonauts 👩🚀
May you be rested, renewed, and raring to go after a relaxing holiday season. But even if you are tired and grimacing at resolutions, after reconnecting with friends, families and pubs, here is to 2023 bringing you success.
And as for success in your investments, we are here to help you in that journey saving you time and helping you find companies you care about.
In this newsletter:
🤳Product update
🔮 Preparing your 2023 strategy
Company Update
We have big plans for 2023. This includes progressing with our strategy builder, introducing trading and providing the highest quality investment analytics. As part of this we are committed to maintaining the robust standards of security which are of utmost importance to us.
We’re working diligently towards our goal of democratising access to the benefits of quantitative investing. So it was good to see Morgan Stanley report on the strong outperformance of quantitative investing in 2022 to wrap up the year.
It also goes without saying that we are looking to build a sizzle about the app upon launch. And as part of our community, we thank you for following our progress, engaging with us, and helping shape the direction and development of the app. There is a lot to come this year 🚀
Past performance is not indicative of future results.
Preparing your 2023 strategy: Our predictions
Our aim is to spot the most obvious trends that can often be implied by a steadfast assessment of market fundamentals. A clear view of the current landscape can help to guide what type of strategies you wish to follow.
Make of this what you will, but definitely don’t take our word for it - this is not investment advice and we do not expect to be any more correct at predicting the future than you, dear reader.
We are clearly not going to get everything right, but like any decent statistician knows we only need to be right more than 50% of the time, so that is our aim, and without further ado here we go.
☄️ Elons empire fire
Elon Musk was big news in 2022. We expect that to continue into 2023. We see no way out of the financial and reputational black hole Twitter has got into. It has insurmountable debts, and has disenfranchised much of its base of advertisers making it difficult to see a clear path to revenue growth. We see Elon and other financiers of the Twitter purchase writing off billions of dollars of his investment in Twitter. A firesale is a distinct possibility from this point.
On top of that there is a real possibility that the rest of Elon’s broader empire will perform poorly. Tesla has been considered massively overvalued for years, and despite large declines in 2022 US analyst Craig Irwin suggesting it has further to fall.
😎 Web3 & the Metaverse
We are bearish on Web3. Each incarnation of it (blockchain, crypto, NFTs, metaverse, DAOs) seem to lack any tangible benefits to date, and given the fairly advanced state of the underlying blockchain technology, we don’t anticipate this changing in 2023 (or beyond for that matter). To be clear, we are not saying these technologies don’t solve any problems, we believe they don’t solve any problems better than traditional database technologies. We’ll keep an eye on any developments in the space, but we don’t see this being where the smart money was - VCs consistently backed the wrong horse - nor where the smart money is going to be.
Speaking of the metaverse, beyond niche applications like computer games (which we acknowledge are not always so niche…), we don’t get the attraction. It’s not something consumers have been asking for, nor does it seem to solve any big problems. On the contrary, our view is that it is asking people to take on too much immersion into a tech world they have no particular desire for, as such we don’t see any significant uptake on the horizon. Our prediction - the metaverse will continue to explode for gamers, but for the rest of us it will not play a significant part in our lives. There is little appetite to wear a VR headset or enter a VR world outside of the novelty setting of a high street showroom, and the idea of replacing real interactions or even video calls with something much more interactive will be viewed as unappealing.
🤖 Is AI the new internet?
AI will continue to show profound and impressive advancements, with exponentially increasing usefulness and functionality. Beware, this is the premise that gave rise to Judgement Day and the rise of the machines against humanity in the Terminator! Joking aside, we don’t think the machines will attempt to take over, after all we can just pull the plug if they do, but there are other serious dangers to consider. We see a serious risk of people misinterpreting, misunderstanding or misapplying AI generated data. To give one example, an AI might give medical advice that is based on learned data from the internet and as we know, data on the internet is patchy, so relying on AI outputs is fraught with risk. Another example is that students may use AI to do their homework, impeding learning for some but enhancing it for others. Just like social media, this will be another broad societal change in our technological base that will open up vast opportunities, and introduce vast dangers, and our prediction is depressingly that, despite it being in the best interest of broader society, our legislators will do absolutely nothing tangible about it until things do get dangerous.
🇷🇺 Repercussions of Russia
FX will bring some big changes in 2023, and partly this will be reverting back on those changes that occurred in 2022 but not exclusively. EMEA rates will begin to suffer drastically as a result of the compounding impact of sanctions, the cost of war, the loss of human capital, and although FX is a zero sum game, the broader economy isn’t; and when Russia suffers we all do. Why can’t we all just get along?
💊 Prescription for success
Pharma will be a good bet for the year. We see the increased focus on health since the pandemic as a long term trend that will continue into 2023. We see this sector of the economy as a defensive bet in 2023.
🔫 First line of defence for your portfolio
Defence is a clear choice for another defensive bet for the year, with tremendous sums being piled into replenishing arms, and increasing tensions in Europe beyond Ukraine’s borders, and a heavy focus on advanced technologies such as guided missiles and drones, we predict huge sums being spent on this sector in 2023. There may be other reasons, perhaps involving ethics, to avoid the sector but purely in financial terms we predict the sector will perform well.
🎈Prices continue to rise
High interest rates and inflation will persist, and insolvencies and bankruptcies will become a major factor for 2023. We expect rising impairment to affect lenders, however since the 2008 crash Risk Weighted Capital requirements have been tightened under the Basel III legislation and stress tests indicate the banks can withstand the possible stress scenarios well. Let’s hope the government doesn’t tear up these capital requirements as part of their so-called ‘Big Bang 2’ ambitions.
🐻 Bearing with the markets
And finally, as we’re in a bear market now, we expect that strong value performers will outperform momentum performers - and this is something you can test for yourself in seconds with our unique strategy builder.
Thanks for reading Stratonaut! Join our waiting list and be amongst the first to get access to the app and stay tuned for more updates on our product and investment strategies.