📈 Crisis creates opportunity

Talking points

🤯 Economic data sparks market sell off? 

The economy has had mixed reviews in 2023, although things are certainly looking better than they did during the end of 2022.

Let's run through some of the key drivers that are impacting our global economy as of today 👇

Although not all good news means good response in the short term, and we have certainly seen that with the global stocks, with them seeing a fall recently.

The MSCI world equity index (.MIWD00000PUS) saw a drop of roughly 1.17%, which may not seem bad but considering this index covers 50 countries, but this is a considerable drop compared to the crypto world.

Further to this, European stocks (.STOXX) fell 1.04%. Although, there is good news around the corner. 

U.S. Treasure yields saw a jump with the 10-year yields climbing 3.945% and two-year yields also rising by 4.81%, which to note, is its highest point since early November.

What's moving the numbers?

Well, after the economic data release, it showed that not only did consumer spending increase by 1.8% in January (the biggest increase for nearly two years), the personal consumption expenditures (PCE) index increased by 0.6% (the biggest increase in six months), bring it to 5.4% for the 12 month period.

All of this has caused a short term sell off as seen in the MSCI world equity index and European stocks above, but long term this is positive news and a good economic outlook.

What does this mean for the crypto and finance world?

Selling is not always a bad thing, in this case a stock sell off is because we have had better economic news and as a result prices have increased, therefore profits have been taken.

Afterall, if you don't take any profits, you never truly profit, right? So this is not a complete worry as sell offs are common after a big climb, but with economic data looking good, perhaps we could see a more positive 2023?

📊 Asian economic resurgence incoming?

So, now that we have seen global stocks fall temporarily, but we've seen the U.S. bounce back on their yields, what does the future forecast say elsewhere?

Let’s start with Asia, there's been allot of hype around Asia, especially with China specifically having an economic overhaul which also saw them dump roughly $92B into the finance markets, you can read more about Asia's crypto charge in our previous blog post

According to the IMF, Asia is expected to have a real GDP growth of approximately 4.7% in 2023, which is an increase of 0.9% from 2023.

However, the fact that they are predicted growth in the next few years indicates a growing economy, so if an economy such as Sri Lanka can grow in such diabolical economic conditions, that is an overall positive sign for the financial markets such as stocks and crypto.

This is hugely positive news as Asia play a big part in the economic world, and both the stock and crypto market will also be impacted by Asia, so the more positive the economy, (theoretically) the better the markets should be.

What about the rest of the world?

Global growth is looking pretty positive too, with a growth projection of 2.9% this year, that is fairly positive and we are starting to see economies recover from the global events of recent times. 

As you can see, growth is looking great, although this is an interesting area as a MASSIVE 82% is expected to come from emerging markets and developing economies this year, which is an incredibly high percentage.

Here's the formula: Growth = better economy = more spending = more investments = asset growth = BULLISH 🐂

Okay, so perhaps a little too over the top, but you get the point. This data is important for financial markets as worldwide growth is a good sign, but these are only predictions, so don't get too carried away. 

🔥 The Great London rise?

The United Kingdom’s (UK) economy has been scrutinised in recent years with many major decisions, combined with worldwide events that seemed to have put them in a difficult economic position.

Looking at the data, it appears that there may finally be some light within the UK, more specifically London... 

London is expected to see growth of 2.6% from 2024 to 2026 which is the highest of any area in the entire UK, with the South East regions coming in a close second at 2.2%.

These numbers could keep the UK expanding at a positive rate and may even steer them out of the recession that they are predicted to enter this year, which they will be desperately hoping to avoid.

How does that impact my investment decisions?

Well, as you've probably caught on from the previous parts of the newsletter, positive economic growth results in more spending, which in turn should see assets like stocks an crypto increase as more money is injected into it.

However, London is looking to become a crypto hub which is massive for the Web3 space, so London leading this charge could be an even more bullish sign as more adoption is vital, but more importantly, a major economy recognising the importance of such technology and opportunity, could spark a bigger ordeal for the entire crypto space!