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These advisors offer personalized guidance and support, taking into consideration various factors such as risk tolerance, investment objectives, tax implications, and overall financial situation. They work closely with clients to understand their financial goals and devise ways to attain them.

The Role of a Wealth Management Advisor to Financial Success

Wealth management advisors have a deep understanding of financial markets, investment products, and financial planning strategies. They leverage their expertise to help clients make informed investment decisions and optimize their portfolio performance. They also monitor market trends and economic developments for arising opportunities or risks and adjust strategies as needed to help clients stay on track to achieve their financial goals.

A wealth management advisor can help clients make informed financial decisions, avoid costly mistakes and optimize their investment returns. They provide ongoing support and guidance, helping clients navigate financial challenges and adjust their plans as needed.

Identifying Unique Financial Needs and Goals

Wealth management advisors identify their clients' unique financial needs and goals, starting with their financial situation, short- and long-term financial goals and risk tolerance. This involves gathering information about income, expenses, assets, liabilities, etc.  For example, they may help clients identify their retirement goals and develop a plan to save for retirement.

The customized financial plan is tailored to the investor's specific needs and goals. This plan typically includes investment strategies, asset allocation and risk management. Once the plan is implemented, the wealth management advisor monitors the performance of the investment portfolio, makes adjustments as needed, and provides regular updates and recommendations to keep the plan aligned with the investor's goals and objectives.

The Benefits of Ongoing Financial Advice and Support

A wealth management advisor's ongoing support provides many benefits.

As market conditions evolve, some adjustments to the investment strategy and asset allocation may be needed to keep the plan aligned with the investor's objectives.

The wealth management advisor can develop strategies to mitigate Potential risks that may emerge due to geopolitical and macroeconomic developments to ensure that the portfolio is aligned with the investor’s risk tolerance.

Ongoing financial advice and support can assure investors that they have a plan in place to achieve their goals. The advisor can also provide reassurance during times of market volatility or economic uncertainty.

Investors save time by delegating administrative tasks, such as rebalancing the portfolio or monitoring investment performance, to a wealth management advisor to focus on more important matters.

Choosing the Right Wealth Management Advisor

Here are some key factors to consider in seeking a wealth management advisor:

Request data on the risk-adjusted performance of a fund or a team against its objectives. Past performance does not guarantee future returns, but the mere availability of such data demonstrates a history of fulfilling obligations to previous clients.

Understanding how fees are structured gives you comfort that your interests are aligned with those of the fund (for example, knowing whether the manager participates in both the upside and the downside).

Understand the advisor's investment philosophy and how it aligns with your goals and risk tolerance. Some advisors focus on long-term growth, while others prioritize income or the preservation of capital. Avoid an advisor who cannot define it to you clearly in a single sentence, or if you cannot summarize it clearly yourself.

To justify a fee, a manager must add value. This typically refers to the ability to outperform the market, which can be accomplished in many ways, from sectoral expertise to a tested investment methodology.  The advisor should explain this "edge" during your first meeting.

Many reputable firms consist of a multi-disciplinary team whose names are usually listed on the website or provided upon request. Basic research on background and credentials can be done on the internet. A deeper dive—requesting references from previous employers—may also be worthwhile.

Wealth management is as much an art as it is a science, but the scientific component is essential. A good wealth manager should have a well-documented methodology (e.g., for screening, selecting and divesting securities) and analytical tools (e.g. proprietary models) that sustains their “edge.” If neither methodology nor tools are evident, you may be dealing with just a gifted storyteller.

Ethics is more than just complying with regulations. It is about intellectual integrity. If you feel that your advisors do not believe their own recommendations, consult those who do.

Ask about the highlights of wealth managers’ professional careers and discuss their most challenging experiences. A trustworthy manager will be forthright about mistakes and missed opportunities and, more importantly, will share the lessons learned. No team is perfect, but the fund managers who can correct course and avoid past errors are best prepared for an uncertain future. Understanding how a fund performed during difficult times helps you predict how it would perform in future crises.

Since 2004, The Family Office has been the wealth manager of choice for more than 200 ultra-high-net worth families and individuals, helping them preserve and growth their wealth through customized solutions in diversified alternatives and more.

 with our financial experts and learn more about our wealth management process.

A wealth management advisor plays a crucial role in helping individuals and families achieve financial success. They are skilled financial professionals who assist clients in creating and implementing a comprehensive financial plan to meet their long-term financial goals and lifestyle needs.

The Benefits of Working with a Wealth Management Advisor - How They Can Help You Achieve Your Financial Goals

This article outlines the facts surrounding the latest move, the initial market reaction, and its implications for the longer-term investment environment.

The decision to raise rates from the previous target range of 4.5-4.75% to 4.75-5.00% was summarized by Fed Chairman Jerome Powell in his public statement reaffirming the determination to stem inflation: “Inflation remains too high and the labor market remains very tight.”

The Consumer Price Index (CPI) released on March 14 by the Bureau of Labor Statistics, showed that declining food and shelter costs reduced inflation from 0.5% in January to 0.4% in February (6.4% to 6% annualized).

 However, the headline rate is still more than three times the target rate of 2%.

The latest March 10 data gave a mixed picture of employment and the economy. Payroll growth continued to be robust (+311,000 new jobs in February) led by leisure and hospitality while wage growth slowed from 0.3% in January to 0.2% and the average workweek declined to 34.5 hours, implying that new jobs are not all full-time.

The economic projections were unchanged from the December forecast. Chairman Powell emphasized that although “

 be appropriate”, the important words to focus on are ’may’ and ‘some.’” Notably absent was the word “ongoing,” in the context of future interest rate hikes.

The Fed had typically based its rate decisions on macroeconomic factors, such as inflation and labor markets. But recent developments in the banking sector have added new factors into consideration. 

Briefly, there was a run on several financial institutions, including Silicon Valley Bank (SVB) and Signature Bank in the US, and the Swiss banking giant Credit Suisse, as depositors panicked. While the fall of Credit Suisse resulted from long-standing issues with the bank’s management and years of reputational decline owing to scandals, the case of SVB was due at least partly to the interest rate hikes of the past year.

The Fed has been balancing the two goals of stemming inflation and avoiding recession. The Great Financial Crisis (2007-2008) highlighted the importance of broader financial stability in achieving these two goals. This means the Fed must consider the impact of rate changes on the banking system. It has accordingly initiated an emergency lending program in coordination with other central banks to ensure US dollar liquidity.

At an earlier Senate hearing on March 7, Fed Chairman Jerome Powell had hinted that interest rates could rise higher than previously anticipated, implying the possibility of a 0.5% rate hike.

 The 0.25% increase, therefore, represents a retraction of sorts.

The decision of the Fed was in line with market expectations on the eve of the announcement.

Stocks rallied initially, but ended the day lower, with the three major indices (Dow Jones, S&P 500, and Nasdaq Composite) down by 1.6% or more. Bank stocks were particularly affected, following comments by Treasury Secretary Janet Yellen that the government was not planning to offer “blanket insurance” for all bank deposits in case of a general contagion.

Short- and long-term Treasury yields also slipped amid more subdued rate hike expectations.

 The US dollar index also fell in line with lower-than-predicted domestic rate expectations.

CME FedWatch, a gauge of market expectations of interest rate movements, showed differing views in 2023, but the consensus was towards a 0.50% decline by year-end,

 despite Powell’s indication that rate cuts are unlikely this year.

Aside from short-term market movements, the important consideration for investors is the outlook for the US economy which will inform the performance of specific asset classes and sectors.

US government measures may help avert a run on vulnerable regional banks with substantial unrealized losses.

 But more conservative lending policies in an uncertain environment may well impact consumer spending and business activity.

This may have the same effect of several rate increases even if the Fed stops further rate increases.

Answering questions following the announcement, Chairman Powell stated that ‘the pathway still exists’ to the hoped-for soft landing, and the Fed is certainly “trying to find it.” He also observed that economic reactions are non-linear and hard to model in a straightforward manner.

The correct approach is therefore one of caution, not complacency. There is a long way to go before the US economic challenges subside.

Since the Federal Reserve (the “Fed”) last meet in February, several consequential events have impacted the US and global banking system alike. In this context, the decision of the Fed to raise interest rates by another 0.25% merits even more scrutiny than usual.


Fed March Update: Rate Rise Persists Amid Mounting Risks

The SVB and Credit Suisse struggles highlight the risks associated with the “one-stop” banking model that encourages customers to put all their financial assets and liabilities under one roof, including loans, corporate banking, and wealth management. Unfortunately, many families and business owners compromised the fundamental security of their assets by adopting this paradigm in favor of the alleged ease of working with a single organization.

While the crisis is concerning, maintaining a proper asset allocation with an independent financial advisor can help investors weather similar storms. Below are a few strategies that protect investors’ assets and wealth:

This presentation is provided to you by The Family Office Co. BSC(c) (“The Family Office”) for informational purposes only, and contains proprietary information that may not be reproduced, distributed to, or used by, any third parties without The Family Office’s prior written consent.

All information, figures, calculations, graphs and other numerical representations appearing in this presentation have not been audited and may be subject to change over time. Furthermore, certain valuations (including valuations of investments) appearing in this presentation are subject to change as they may be based on either estimates or historical figures that do not reflect the latest valuation. Although all information and opinions expressed in this presentation were obtained from sources believed to be reliable and in good faith, no representation or warranty, express or implied, is made as to their accuracy or completeness. The information contained herein is not a substitute for a thorough due diligence investigation. Past performance is not indicative of and does not guarantee future performance. Exit timelines, prices and related projections are estimates only, and exits could happen sooner or later than expected, or at a higher or lower valuation than expected, and are conditional, among other things, on certain assumptions and future performance relating to the financial and operational health of each business and macroeconomic conditions.

The Family Office makes no representation or warranty, express or implied, with respect to any statistics or historical or current financial data, whether created by The Family Office through its own research or quoted from other sources. With respect to any such statistics or data delivered or made available by or on behalf of The Family Office, it is acknowledged that (a) the investor takes full responsibility for making its own evaluation of the materiality of the information and the integrity of the quoted source and (b) the investor has no claim against The Family Office.

Amounts in currencies other than the US Dollar are translated using prevailing market rates as calculated by The Family Office or its service providers and may differ from the rates used by banks. The rates are indicative only and do not reflect the rates at which The Family Office would be prepared to enter into any transactions with other parties.

Certain information contained in this presentation constitutes “forward-looking statements,” which can be identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “plans,” “estimates,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology. To the extent this presentation contains any forecasts, projections, goals, plans and other forward-looking statements, such forward-looking statements are inherently subject to, known and unknown, significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond The Family Office’s control and may cause actual performance, financial results and other projections in the future to differ materially from any projections of future performance, results or achievements expressed or implied by such forward-looking statements. Investors should not place undue reliance on these forward-looking statements. The Family Office undertakes no obligation to update any forward-looking statements to conform to actual results or changes in The Family Office’s expectations, unless required by applicable law.

The Family Office makes no representation or warranty, express or implied, with respect to any financial projection or forecast. With respect to any such projection or forecast delivered or made available by or on behalf of The Family office, it is acknowledged that (a) there are uncertainties inherent in attempting to make such projections and forecasts, (b) the investor is familiar with such uncertainties, (c) the investor takes full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts so furnished to it and (d) the investor has no claim against The Family Office.

This presentation represents a summary of certain information, the full terms of which are contained in a Private Placement Memorandum that should be reviewed for a more complete understanding of the investments and their risks. In addition, this presentation does not constitute an offer to sell, or a solicitation to buy, any instrument or other financial product, nor does it amount to a commitment by The Family Office to make such an offer at present or an indication of The Family Office’s willingness to make such an offer in the future.

The Family Office is a Category 1 Investment Firm regulated by the Central Bank of Bahrain 

.53871 dated 21/6/2004. Paid Up Capital: US$ 10,000,000. The Family Office only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

The overnight collapse of the Silicon Valley Bank (SVB), a bank servicing venture capital companies and early-stage businesses, and the stock crash of Credit Suisse, the second largest lender in Switzerland, caused widespread concern among investors and had a ripple effect on markets all over the world by causing bank stocks in the US, Europe, and Asia to crash.

Is It Safe to Concentrate my Assets and Liabilities in One Institution? 

Among developed nations, the UK has experienced severe economic pressure due to high inflation, low wage growth, and soaring import costs. This has resulted in a prolonged cost-of-living crisis with widespread effects on the population.

This article examines the underlying factors driving the UK's cost of living crisis, its effect on consumers, and the lessons for investors from this story.

High inflation coupled with slow growth in disposable income makes the necessities of daily life—food, clothing, accommodation and fuel/ energy—more expensive for the regular consumer.

As of January 2023, the UK's annual inflation was 10.1%, above the Eurozone average (8.5%) and significantly above the US (6.1%).

 Meanwhile, the UK’s latest annual wage growth figures (excluding bonuses) show an increase of only 6.7%.

Inflationary pressures have been building since early 2021, peaking in October last year (11.1%) to the highest level in 41 years.

 While inflation has declined subsequently following rate increases by the Bank of England (BoE), it remains at five times the target rate.

The BoE has indicated that inflation will remain elevated for another two years,

 and that growth in pay levels will continue to lag for the next 12 months.

 Put simply, it seems that the crisis will persist for the foreseeable future.

While the UK has been subject to the same shocks and shortages as most Western countries, certain factors have left it more exposed than its European neighbors. The overall economy is heavily reliant on imported goods, leaving it particularly vulnerable to disruption in global trade or increases in global shipping costs.

Increases in the price of gas following the reduction of Russian gas sales to Europe have hit the UK especially hard in 2022, as approximately 80% of households in England use gas for heating, and gas-powered stations generate one-third of the electricity.

Also, the pound has weakened against the dollar and other major currencies over the past decade, magnifying the price rises in dollar-denominated commodities such as oil and gas. Over the past year, domestic gas prices and the cost of domestic electricity have surged 129% and 67%, respectively, translating into higher daily costs for the ordinary citizen.

The UK government has responded to the crisis with a variety of measures, including direct payments to eligible households and energy price caps. The support focused on the most vulnerable (the disabled and elderly), but could only go so far to meet the overall crisis.

Banks and other financial experts are sharing inventive strategies to economize, such as using second-hand uniforms at schools and smaller basket sizes at supermarkets, developing side jobs, and cultivating the art of the “staycation.”

But many of the less well-off in society are being forced to make significant changes to their lifestyles, such as spending less on non-essentials (and, in some cases, essentials), using less energy, and being more diligent in comparing prices to find the best deal. Holidays, nights out, large purchases and trips abroad are off the agenda for many who could previously afford them.

The saying goes, “The best time to fix the roof is when the sun is shining.”

The UK experience shows that when a crisis hits, making economies may not be enough to sustain even a frugal lifestyle, as some are forced to use personal savings or borrow for daily expenses.

 Even if the crisis abates, this affects their long-term financial future negatively.

Inflation devours the power of savings and also weakens earning power. Saving to invest in a diversified, professionally-managed portfolio, can not only beat inflation but also provides for the rainy days that—as history has shown—will come, sooner or later.

Over the past two years, the COVID-19 pandemic, geopolitical tensions in Ukraine, and resulting supply chain disruptions have caused severe financial repercussions for governments and individuals worldwide.

What Investors Can Learn from the UK’s Cost of Living Crisis

This article delves into the implications of this interest rate increase. We'll examine the economic data, market reactions, and potential impact on the U.S. economy and investors worldwide.

The 0.25% increase brings the federal funds rate to a target range of 4.5-4.75%, the highest in over 15 years. 

The Fed is also continuing its quantitative tightening (QT) program to slow inflation by reducing the money supply. Since June last year, its balance sheet has decreased by approximately $463 billion as maturing debt has not been reinvested. 

The latest 0.25% hike was smaller than the previous increases of 0.50% and 0.75% over the past 12 months. This indicates that the decade-high inflation that emerged in 2022 is receding. The Consumer Price Index has been falling every month since its peak of 9.1% in June 2022 to 6.5% in December, its lowest in over a year. 

Fed Chairman Jerome Powell noted various macroeconomic factors supporting this trend, including modest economic growth, weaker housing market activity, and subdued investment by businesses.  

The labor market remains an area of caution. Although wage growth slowed toward the end of 2022,  job openings increased in December with 1.9 positions per unemployed worker.  Data published after the meeting reinforce concerns, with unemployment decreasing to a 53-year low. Monthly wage growth also held steady at 0.3%, although cooling year on year (to 4.4% from 4.6% in December). 

While acknowledging that the “disinflationary process” has begun, the Fed intends to continue to raise rates as inflation remains far above the 2.0% target. Chairman Powell indicated that “a couple more” increases are under discussion, bringing the final rate above 5% in May, in line with official predictions in December. 

However, Chairman Powell indicated a “path” to the target inflation level that does not involve significant economic hardship. A “soft landing” would be an ideal scenario where inflation is dampened without triggering a deep recession.

Despite initial jitters upon the announcement of the new target rate, markets responded favorably to the Chairman’s guarded optimism.

 Although the message said that it would be “very premature to declare victory,” its positive tone gave investors some clarity on rate actions and hope for the economy overall.

The market expects two more 0.25% increases in March and May.

 While opinions are divided on whether rates will reduce by year-end, rates will remain high for a longer period.

Some still point to the need for caution, noting two risks: 1) recession is still a real possibility, and the effect of the steep rate rises from last year have yet to come, and 2) over-optimism could renew inflation, forcing the Fed to raise rates still higher.

The release of quarterly economic projections at the next Fed committee meeting on March 21-22 may give the markets more clarity.

 Meanwhile, the Fed appears to be cautious in both words and action. Investors should steer a similar course: observe market signs and interpret them cautiously.

https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us

https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230201.pdf

https://www.bls.gov/news.release/pdf/eci.pdf

https://www.nytimes.com/2023/02/01/business/economy/labor-jolts-report-layoffs.html

https://www.bls.gov/news.release/pdf/empsit.pdf

https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20221214.pdf

https://www.ft.com/content/03b5354d-ad3c-4bfd-b1cc-c64d46dfdf28

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

The Federal Reserve (the “Fed”) raised its benchmark interest rate by 0.25% on February 1, marking the eighth rate hike in 12 months. This sheds light on the Fed’s view of the state of the economy and expectations.

A New Chapter? Deconstructing The Latest FOMC Rate Decision

All information, figures, calculations, graphs and other numerical representations appearing in this presentation have not been audited and may be subject to change over time.  Furthermore, certain valuations (including valuations of investments) appearing in this presentation are subject to change as they may be based on either estimates or historical figures that do not reflect the latest valuation.  Although all information and opinions expressed in this presentation were obtained from sources believed to be reliable and in good faith, no representation or warranty, express or implied, is made as to their accuracy or completeness.  The information contained herein is not a substitute for a thorough due diligence investigation.  Past performance is not indicative of and does not guarantee future performance.  Exit timelines, prices and related projections are estimates only, and exits could happen sooner or later than expected, or at a higher or lower valuation than expected, and are conditional, among other things, on certain assumptions and future performance relating to the financial and operational health of each business and macroeconomic conditions.

The Family Office makes no representation or warranty, express or implied, with respect to any statistics or historical or current financial data, whether created by The Family Office through its own research or quoted from other sources.  With respect to any such statistics or data delivered or made available by or on behalf of The Family Office, it is acknowledged that (a) the investor takes full responsibility for making its own evaluation of the materiality of the information and the integrity of the quoted source and (b) the investor has no claim against The Family Office.

Amounts in currencies other than the US Dollar are translated using prevailing market rates as calculated by The Family Office or its service providers and may differ from the rates used by banks.  The rates are indicative only and do not reflect the rates at which The Family Office would be prepared to enter into any transactions with other parties.

 Certain information contained in this presentation constitutes “forward-looking statements,” which can be identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “plans,” “estimates,” “intend,” “continue,” or “believe” or the negatives thereof or other variations thereon or comparable terminology.  To the extent this presentation contains any forecasts, projections, goals, plans and other forward-looking statements, such forward-looking statements are inherently subject to, known and unknown, significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond The Family Office’s control and may cause actual performance, financial results and other projections in the future to differ materially from any projections of future performance, results or achievements expressed or implied by such forward-looking statements.   Investors should not place undue reliance on these forward-looking statements.  The Family Office undertakes no obligation to update any forward-looking statements to conform to actual results or changes in The Family Office’s expectations, unless required by applicable law.

 The Family Office makes no representation or warranty, express or implied, with respect to any financial projection or forecast.  With respect to any such projection or forecast delivered or made available by or on behalf of The Family office, it is acknowledged that (a) there are uncertainties inherent in attempting to make such projections and forecasts, (b) the investor is familiar with such uncertainties, (c) the investor takes full responsibility for making its own evaluation of the adequacy and accuracy of all such projections and forecasts so furnished to it and (d) the investor has no claim against The Family Office.

 This presentation represents a summary of certain information, the full terms of which are contained in a Private Placement Memorandum that should be reviewed for a more complete understanding of the investments and their risks.  In addition, this presentation does not constitute an offer to sell, or a solicitation to buy, any instrument or other financial product, nor does it amount to a commitment by The Family Office to make such an offer at present or an indication of The Family Office’s willingness to make such an offer in the future.

.53871 dated 21/6/2004. Paid Up Capital: US$10,000,000. The Family Office only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

 David Darst, Senior Analyst and Investment Strategist at The Family Office, shared some investment insights on key issues that influence portfolio composition, asset allocation, and investment strategy.

David Darst’s 2023 Investment Thoughts

The Federal Open Market Committee (FOMC) meeting at the end of this month will announce the next move on short-term interest rates on February 1. What can we expect in this meeting and for the year ahead? And what does it mean for investors?

At the beginning of 2022, inflation was widely believed to be transitory. As it continued to rise, the Fed started a series of sharp interest rate increases, as high as 0.75% per session, raising rates from near zero in January 2022 to almost 5%.

The repercussions of the war in Ukraine on commodity prices may have compounded the problem. But the root cause is an over-abundance of money following years of low rates, quantitative easing and stimulus measures.

When consumers begin to spend their savings, businesses respond by hiring more staff. Wages rise amid growing competition for labor. To pay for higher costs, they often raise prices further, leading workers to demand higher pay, creating a self-reinforcing upward trend.

The Fed has been trying to address this cycle using interest rates to apply the “brakes” on a potentially overheating labor market.

Context for the first Fed meeting of 2023

The minutes from the December Fed meeting forecast a range of 4.9%-5.6% for the federal funds rate in 2023.

 Officials also indicated that the pace of increases may slow to limit risks to the economy. But it seems certain that rates will continue to rise, crossing the 5% level.

How fast, how high and for how long rates will rise depends largely on how inflation and wage growth develop in the initial months of the year.

The latest figures are encouraging. Data released on January 6 show employment at a 16-month high, with wage growth declining to 6.1% from 6.4% in the previous month.

The latest consumer price index (CPI) figures show that inflation cooled further in December, with a headline rate dropping to 6.5% from 7.1% in November and a 9% peak in June. Core inflation (excluding food and fuel) also declined from 6% to 5.7%.

If the price of goods continues to drop as supply chains recover, headline inflation may continue its downward trend into 2023, although inflation in services (excluding housing costs) is still rising (+0.3%).

On the day of the latest inflation data release, Patrick Harker, the president of the Federal Reserve Bank of Philadelphia, indicated that future increases of only 0.25% may be appropriate following the steeper hikes last year.

Based on 30-Day Fed Fund futures pricing data, markets expect two more 0.25% rate hikes in February and March, and no further change until December, when rates begin to decline slowly.

With its dual mandate to control inflation and maintain high employment, the Fed has a difficult path this year.

Tackling inflation with higher interest rates has only been possible due to continued economic growth. But even if rates remain unchanged after March, the quest to cool wage growth may restrict economic activity. The longer rates remain high, the greater the risk that another unexpected crisis, such as the Ukraine war, could tip the US economy into recession.

The Fed is hoping for a “soft landing” as the ideal outcome, or a strong economy combined with cooling wage growth.

With so much uncertainty, investors should adopt the attitude of the Fed: cautious optimism with readiness to change course as circumstances evolve.  

The global economy may start to improve as it passes the critical point on inflation, but the journey to recovery is far from complete, let alone assured.

https://www.reuters.com/markets/us/fed-meeting-minutes-may-point-rate-hike-endgame-new-debate-phase-2023-01-04/

https://www.forbes.com/sites/simonmoore/2022/12/15/fed-sees-further-hikes-in-2023-heres-what-could-change-that/?sh=45245e685a17)

https://www.atlantafed.org/chcs/wage-growth-tracker

https://www.bls.gov/news.release/cpi.nr0.htm

https://www.barrons.com/articles/3-fed-presidents-speak-today-51673474854

https://www.reuters.com/markets/us/us-jobs-report-breathes-life-into-feds-soft-landing-scenario-2023-01-06/

This presentation is provided to you by The

Family Office Co. BSC(c) (“The Family Office”) for informational purposes only, and contains proprietary information that may not be reproduced, distributed to, or used by, any third parties without The Family Office’s prior written consent.

The Family Office is a Category 1 Investment Firm regulated by the Central Bank of Bahrain C.R.No.53871 dated 21/6/2004. Paid Up Capital: US$ 10,000,000. The Family Office only offers products and services to ‘accredited investors’ as defined by the Central Bank of Bahrain.

Amid unprecedented high inflation worldwide over the past 12 months, the Federal Reserve (the “Fed”) has taken strong measures to control U.S. prices. At 4.25%-4.5%, interest rates are at the highest level since 2007.

Setting The Stage For 2023: FOMC Meeting Preview

 The insights are grouped in three sections:

 covering global economic trends and the macroeconomic environment;

 The future is inherently uncertain, and no forecast is infallible. However, by staying informed of the latest trends and attuned to the views of leading experts, investors improve their chances of success and remain ahead of the herd.

 We hope this report will help you navigate the investing landscape of 2023.

You should always set aside some money for emergencies or future expenses, such as a vacation or new car

 But you only beat inflation by investing.

Investing creates value over time and may also generate regular income. But it also entails risk. The assets in which you invest may rise or fall in value with market cycles and events.

A common mistake that many investors make is that they panic when the market falls and sell their investments at low prices to avoid further losses. Selling during a market downturn causes a permanent loss that cannot be recovered.

Investors should generally take a long-term view and ignore short-term market volatility. In the absence of fundamental factors that impair the value of certain assets permanently, unrealized losses during market downturns are usually recovered when the down cycle ends and growth resumes.

A sound investment strategy begins with a well-constructed portfolio based on your risk tolerance, objectives, time horizon, and financial obligations. A well-constructed portfolio entails allocating assets to diversified investments that are well positioned for long-term growth. If the assets are uncorrelated, losses in any given investment will be offset by gains in others over time.

But starting with a well-constructed portfolio is not enough. The portfolio must be managed actively as the environment changes, replacing assets that have limited potential with more promising ones.

Only one thing is certain. Your wealth will erode over time if you do not invest it wisely.

The banks present a mix of views, broadly aligning around low positive growth for the US economy in 2023.

 BlackRock is alone in forecasting an overall decline in GDP (-2.0%) and is the most negative on corporate earnings, but concedes that it expects house views to change “more frequently” than in the past.

 HSBC believes that one or two quarters of negative growth are possible, while Citi points to higher interest rates, a likely 10% decline in corporate earnings, and the possible extension of China’s zero-Covid restrictions as potential drivers.

 JP Morgan also maintains that a recession is likely in 2023, but it will be mild. 2024 will return to pre-Covid normality: slow growth, low inflation, moderate interest rates and strong corporate profit margins.

 Morgan Stanley points to the robust labor market, which will limit the depth of any recession and speed the ultimate recovery.

The global outlook is similarly mixed, but the growth trajectory is predicted to be better than the US economy as emerging markets continue their strong run. Citi believes that global growth will suffer initially in 2023 while markets search for signs of an impending recovery.

 HSBC provides more detailed insights by geography. It expects the European Central Bank and the Bank of England to raise rates in the continuing battle with inflation.

 Higher mortgage rates will impact the housing market, especially that disposable incomes are already challenged by the cost-of-living crisis. As already seen in the UK, governments may have little leeway to spend on relief measures, as government borrowing costs are escalating.

 Asian economies are under pressure from a slowdown in demand for consumer electronics. While this is a particular issue for Taiwan and South Korea, Japan has so far avoided the full force of this trend as improvements in the automotive supply chain are helping to bolster its export revenues.

 Japan’s resilience is also partly dependent on the relative weakness of the Japanese yen against a strengthening US dollar. But this temporary breathing room is likely to dissipate as currency markets return to equilibrium.

 JP Morgan sees a positive story for international markets, with more potential for gain than decline. The difficult economic outlook has already been priced into valuations, but expectations may be overly pessimistic. This means that if the news turns out to be only “less bad,” the effect on prices could be positive. 

All banks see declines in inflation from end-year 2022 levels, albeit at differing speeds.

 Morgan Stanley believes a decline in inflation is consistent with a corresponding slowdown in demand and improvements in global supply chains.

 While JP Morgan predicts a less steep decline, it forecasts year-on-year inflation as low as 2.6% by Q4—within reach of the 2% target. UBS concurs that this may be achievable by the end of 2023 in Europe and the US, but more volatility could be along the way.

 HSBC is the least optimistic, asserting that inflation is likely to remain high through 2023, with more reprieve in Asian countries.

Most believe that tightening will end some time next year. Some believe it will be as early as Q1 (JP Morgan), some say by mid-year (Citi) and some are in between (UBS).

 UBS predicts terminal rates of 5.0%, 2.5%, and 1.5% for the US, the Eurozone, and Switzerland, respectively. BlackRock indicates that pausing will give central banks a chance to gauge the effect of previous rate rises on the economy.

. HSBC asserts that rates will stay high with persistent inflation. Morgan Stanley (in line with its 10-year Treasury forecast) believes that the restrictive monetary environment will likely remain in place.

 UBS believes that rate cuts might be under discussion by year-end, but further volatility may mean high rates staying for longer.

 Citi believes that the negative impact of higher US interest rates on the global economy and rising unemployment at home will force the Fed to loosen its monetary policy during the second half of 2023.

China’s zero-Covid policy has dampened economic activity since its adoption, and investors are keenly observing whether this will continue.

 BlackRock predicts that more economic intervention by the Chinese government will put the country on the path to lower growth. Despite a potential global recovery, Chinese assets are riskier.

 JP Morgan notes that a slow reversal of Covid restrictions may hamper efforts to lower interest rates further, but Chinese A-shares with exposure to business technology, domestic demand, and energy transition are likely to be the first to rebound.

 Morgan Stanley and HSBC concur that easing zero-Covid policies with a weakening US dollar may well make Chinese stocks attractive to international investors again.

Given the general uncertainty over the pace of economic recovery, there is disagreement over which sectors are likely to be resilient.

 HSBC favors defensive sectors, such as energy and consumer staples globally, healthcare in Europe, and utilities in the US. Blackrock favors financials over consumer staples, but is otherwise broadly aligned.

 There is a strong undercurrent favoring sectors that support the megatrend of an ageing population, chiefly healthcare. Citi echoes this view, asserting that healthcare is set to grow faster than the economy for a sustained period, and will exhibit less cyclicality than other sectors, shielding investors from turbulence.

 Pharma stocks have historically continued to increase dividends during bear markets, and investors should consider building exposure to more disruptive technology related to life sciences (MedTech, Biotech).

All banks touched upon the rising impact of sustainability issues on the behavior of investors, and the prospect of growth in this space.

 Morgan Stanley frames the trend as a growing obligation on responsible investors to ensure that the environmental, social and corporate governance (ESG) performance of companies is integrated into their financial analysis of specific securities.

 Another bank focused on the commercial opportunities afforded directly by sustainability-related infrastructure projects.

This summary combines the analyses from six global financial institutions—Citi, UBS, Morgan Stanley, JP Morgan, HSBC and BlackRock—to provide a comprehensive overview of the investing environment in 2023.

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