Press release: The main topic for investors next year will be high interest rates and high inflation. Despite the efforts of central banks, the period of high inflation may last longer due to increasing state spending. This was agreed by the participants of the XTB Online Investment Conference , which took place on Saturday, November 26. At the same time, according to many of them, it is not necessary for investors to worry too much about whether an economic recession will occur. The correct investment horizon should be long-term, and a recession also brings good opportunities to buy shares.
Is recession something to fear?
"From an investor's point of view, it is not worth thinking too much about whether a recession will come. Those markets can go up and down during a recession, and the investor is thinking in a horizon longer than six to 12 months. And the best purchases are made during recessions, so a recession is not something an investor should be afraid of," said Daniel Gladiš, founder of the Vltava Fund investment fund, for example. He added that periodic and recovery recessions are beneficial.
"There is no need to deal with the recession, the horizon should be long-term and time is our friend," said XTB external advisor Jaroslav Brychta. He pointed out that the biggest issue in the coming months will be how economies deal with high rates. “The question is how high can rates go and how long to keep them there. We hope it will be a smooth landing, that the central banks can handle it. But the longer we stay at high rates, the more pressure there will be on the market," he said.
How will it be with inflation in the coming months?
In connection with inflation, Gladiš pointed out that inflation will not decrease as quickly as the central banks would like. "For example, in the case of the Czech National Bank, it will be easier to reduce inflation from 18 to eight percent than later to reduce it from eight to four percent," he estimated. "We are facing an above-average period of high inflation and real negative interest rates," he added.
Even though the financial markets have been falling for a year now, according to Gladiš, nothing special is happening. "The biggest tensions are in the bond market, and specifically in technology stocks, but otherwise it's a good investment," he concluded.
David Monoszon, founder of the analytical service MarkeTimers.com, pointed out that high inflation in the markets is historically accompanied by high volatility and trends tend to be short. "In such cases, the buy and hold strategy is very frustrating," he said.
What is worth watching and what titles are popular?
According to Cyrrus chief analyst Anna Píchová, the sectors that are worth following or directly including in the portfolio in the current environment always benefit from the beginning of a new economic cycle that follows a recession. According to her, such sectors include the financial sector, consumer goods, industry and energy. "These are the sectors we should be looking at," she said. On the contrary, investors should pay attention to, for example, companies dependent on commodity prices. "In the event of a hard landing and weakening global demand, a drop in commodity prices is likely," she warned.
SP500 and ČEZ are the main drivers?
XTB Business Director Vladimír Holovka said that investing in the S&P500 index ETF has become popular in the past year. "And CEZ was the top instrument among Czech and Slovak investors. He won by several horse lengths when investing," he said.
According to Conseq investment strategist Michal Stupavský, the global equity outlook is slightly negative. According to him, the reason is high inflation, the risk of stagflation, a massive tightening of monetary policies or the continued high analytical estimates of profits for 2023 and 2024. "However, you can still find highly attractively valued sectors and regions," he said.
Passive investing?
Other speakers at the conference included, for example, the co-owner of Finlord Boris Tomčiak, who spoke about passive investing and building investors' assets. Štěpán Pírko, Director of the Bohemian Empire Qualified Investors Fund, introduced those interested in trading according to algorithmic systems.
Summary
In addition to the above mentioned, many other interesting information was also heard at the conference. At the entire event, a total of 13 speakers discussed and presented in three panel discussions and seven lectures. If you would like to learn more, the full recording of the XTB conference is available at XTB website. Pro For newly established clients, we have also prepared bonus materials focused on the seasonality of stock trading, shorting stocks, and an e-book on dividend stocks.
