How much have we learned from 2022?
By all accounts, 2022 has been a challenging year for investors. However, at BBVA we like to see the glass half refillable, which means that, regardless of the inherent noise and tensions in the market, simply by focusing on the analysis of results, the optimization of resources and taking a long-term outlook, it is possible to find great opportunities adapted to your investor profile and your vision of the world.
At New Gen, our aim is to bring you first-hand market news, connecting this reality with our lives.
Inflation and global economic growth headwinds are not at all kind to the technology sector. Note that the valuation of these companies often focuses on the discounted future cash flow value at the present time. Therefore, their high dependence on the evolution of interest rates and the clear risk of a recession make them comparatively the worst-performing industry.
On the other side of the coin, yields on some assets have been rising substantially as central banks have been raising rates, bringing significant price declines and a slowdown in the economy around the corner. In the case of fixed income or bonds of the best companies in the world, the situation seems more favorable, because it provides enormous predictability when investing, with the knowledge we are acquiring a precious asset that will become increasingly valuable as the years go by, since new emissions will be issued at a lower premium.
No secret formula or magic wand exists to achieve desirable results, but there are models that have proven more effective than others over time, or simply better adapted to certain market conditions. Value investing seeks consistent results with positive returns, focused on a long-term horizon. This investment philosophy popularized by Warren Buffett, arguably one of the best investors in history, is based on acquiring quality stocks at lower prices than their intrinsic or real value. For example, energy stocks currently offer an attractive risk/reward opportunity.
Commodities: Supply chain disruptions and the war in Ukraine has impacted us as investors but also as consumers, paying ever higher prices for immediate access to essential staples. For commodities futures, their price is directly related to changes in world supply and demand expectations, so their historical risk and return characteristics have historically shown few or no long-term relationships with other financial assets, such as equities.
Health: It is not only a fact we are living longer, but also that we want to continue doing so in the best possible conditions. While concerns about wellness have accompanied us for a lifetime, advances in molecular biology and genetic engineering are becoming increasingly appealing to the markets. Funds and investors are showing greater interest in gene therapies, biological developments and a whole series of advances that, together with traditional medicine, are shaping the new paradigm.
Metaverse: Our society is undergoing structural behavioral changes, and a large part of this is due to the digitalization of the world and the economy. It is estimated that by 2030 there will already be more than 25 billion connected devices (IoT) worldwide and, in relation to the metaverse, experts explain its development is in full swing and is expected to reach a size of 700 billion by 2030.
Nothing lost, but learned. Blockchain, or the core technology that underpins platforms such as Ethereum, Bitcoin and DeFi, works, and it does so with a purpose: to offer a real alternative by placing technology at the service of society to generate more efficient systems with economies of scale, providing development for a world in constant change.
Of course, it is the responsibility of all players to make the whole system work and, in this sense, 2022 has been a decisive year in terms of trust generation and adoption by states, institutions and companies around the world. We are witnessing how Blockchain technology is gradually transforming the interaction between the main players in the financial industry. As a bank operating in this environment, our mission at BBVA is to ensure a solid and realistic transition, creating a fairer society where everyone can access the new digital economy that is being forged.
2023, there we go! 🚀