“No recession in 2023, prices slowing down and rates down by the summer”

What will 2023 be like for international financial markets? Massimo Siano, head of southern Europe for the investment house 21Shares in Zurich, forecasts globally “a parallel rise in shares and bonds, a drop in raw materials, starting with natural gas, and consequently also in inflation ”; he adds that “the recession will be avoided”, that “interest rates will begin to fall by the summer” and goes too far to say that “the winter of cryptocurrencies is already over, this will be the year of cryptocurrencies”. On the last point he puts his hands forward: “I am in a conflict of interest”, because virtual currencies are the main financial product handled by 21Shares, however Siano argues: “Since they have existed, cryptocurrencies have had three phases of collapse and rebound , and each time they have already gained +50% in the first month of the relaunch. And the same thing happened in January 2023. In the three previous cases, after +50% in the first month there was a further, very rapid growth in prices: +300 or 400% in six months. There is no guarantee that the past will repeat itself, but I am convinced it will, because the weaker players have left this market and those who remain are launching important technological innovations. Investors are slow to position themselves on cryptocurrencies because their brain is influenced by the performance of stocks, which is much less volatile, while that of cryptocurrencies is more so. I think in July we will be here talking about the 300 or 400% boom of virtual coins, many people will enter the market at that point, but it will be too late”.

Siano points out a further technical factor that can push cryptocurrencies: “To avert the risk of recession, the Federal Reserve has bought all types of assets on the financial market: shares, bonds, high yields, etc., which it will now gradually resell. The only financial product that the Fed hasn’t bought are cryptocurrencies, so now it doesn’t have a mass of virtual currencies to put back on the market by lowering their prices”.

Attention: we say all this without wanting to advise and much less instigate savers to invest in cryptocurrencies, which Siano himself defines as very volatile, and it is known that in current parlance “volatile” means “risky”; anyway this is his opinion. As a further caveat, Siano observes that “all forecasts can fail if some black swan arrives on the markets, i.e. a devastating and unpredictable event, and unfortunately we have seen some in recent years, as happened with the Covid pandemic and with the war in Ukraine”.

As an example of a problem that (perhaps) is looming on the horizon, Massimo Siano points to the inversion of the yield curve of short- and long-term bonds in America: “Logica wants short-term bonds to yield less, and long-term term offer higher returns, to compensate for the longer term capital immobilization. Instead, the opposite is happening in the United States right now, i.e. long-term bonds yield less than short-term ones. This may mean that investors are expecting a recession”, although the explanation may be different. Even taking this factor into account on one side of the scale, Siano remains convinced that in 2023 the recession will be avoided.