Many of the major themes that were prominent in 2022 continued to advance over the course of 2023. The impact of the COVID-19 pandemic lessened, although there was a resurgence of yet another variant in the fall. However, most travel and capacity restrictions have lifted, and supply chains have largely recovered, although many companies are considering diversifying their sources to minimize future single point of failure risks. The ongoing Ukraine/Russia conflict has continued to create global uncertainty and geopolitical instability, and recent violence has occurred in the Middle East.
Meanwhile, as identified in our paper Themes and opportunities 2024: An age of agility, we see a number of systemic shifts and regime changes taking shape in the mid-to-long term. The higher cost of capital and lower liquidity, an evolving dynamic between cyclical and structural inflationary forces and accelerating climate risks are affecting the way investors might position for the energy transition, understand their relationship with nature, and approach asset classes in a new inflationary environment.
Indeed, over the past year central banks have aggressively tightened monetary policy to restrictive levels in the developed world as they seek a delicate balance between countering inflation and maintaining financial stability, which is discussed in detail in the Economic and market outlook 2024.
All these developments propose important considerations for investors both in terms of strategy and investment beliefs.
