Here are the main takeaways of a recent discussion where Florin Ilie, Deputy CEO & Head of Wholesale Banking at ING Romania, and Andrei Dudoiu, President BoD SeedBlink, analyzed Macroeconomic Trends for 2023 based on SeedBlink Pulse Survey.

This survey included responses from over 100 sophisticated investors from our community who shared their insights about the common sentiment over the current economic landscape and what investors should have in mind to build a strong portfolio. These investors, hailing from various European countries such as Romania, Italy, Greece, the Netherlands, Bulgaria, Belgium, and Malta, shared their insights and outlook for 2023. These sophisticated investors are part of our community and are familiar with venture investments, which could have influenced their inclination toward this investment type.

This article aims to provide a comprehensive overview of the key takeaways from the webinar, shedding light on the perspectives of these investors and their expectations for 2023.

How do sophisticated investors see the market in 2023?

The survey revealed that 64% of the investors believed that inflation would subside this year, while 52% mentioned that we are in a recession cycle with decreasing economic growth.

When asked about the top potential risks that might affect their portfolios, the participants cited inflation (62%), recession (60%), geopolitical risks (54%), and market volatility (51%). Despite these concerns, the investors expressed interest in various investment opportunities, with stocks (64%), exchanges (64%), venture investments (57%), and bonds (42%) emerging as the top choices.

What does the market think about the geopolitical risk?

In summary, understanding market consensus and expectations is crucial for investors when deciding how to position themselves in various markets, such as stock exchange, seed capital, venture capital, private equity, or fixed-income markets.

Florin’s expert opinion helped shed more light on these findings by doing a reality check on the macroeconomic landscape.

Main takeaways:

• Interest rates are the key driver of market fluctuations, and investors should pay close attention to them.
• The market consensus for Eurozone growth is estimated to be around 0.6%, while Romania is expected to have a growth rate between 2% and 3%.
• The market perceives geopolitical risks, such as the Russia-Ukraine conflict, as low-probability, high-impact events, and they need to be more factored into the current prices. Investors should consider these factors when deciding how to position themselves against or with the market.

What’s going on in the world of inflation?

Secondly, we delve into the relationship between market growth, interest rates, and inflation and how they impact investor decisions. As each economic situation is unique, it's crucial to understand the nuances at play to make informed decisions.

The market's perspective on these factors, driven by the experiences of investors and central banks, helps shape expectations and responses to the ever-changing economic landscape. In particular, understanding how inflation affects interest rates is vital for evaluating potential risks and opportunities.

Main takeaways:

• Most investors believe inflation will continue to soften, which aligns with market expectations.
• Core inflation, driven by salaries, remains stubborn and doesn't show signs of decreasing, prompting central banks to maintain and slightly increase interest rates to avoid an inflation-salary spiral.
• By keeping inflation expectations in check and carefully managing interest rates, central banks aim to prevent economic recession and maintain stability. So far, the situation is under control, with no significant negative outcomes.

What’s happening in the tech sector?

Now, let’s explore the current situation in the tech sector, which has recently experienced a series of layoffs that have raised concerns among industry insiders. It is important to note that these layoffs were not isolated to the tech sector alone but were more noticeable due to the industry's prominence and rapid growth in recent years.

The tech sector has seen some bubble-like events in the past, which may have led to overstaffing and excessive salaries in certain areas. As a result, many of these layoffs can be attributed to a necessary correction in the market to address these imbalances.

Main takeaways:

• The tech sector had pockets of overstaffing, which have become more apparent with the market downturn.
• Most people who have been laid off quickly find new employment, keeping unemployment rates stable.
• New positions often come with lower salaries, resulting in an overall reduction in wages within the industry. Some observers anticipated this adjustment and reflected a natural market correction.

What sectors will benefit the most from a decreasing discount rate?

The impact of these decreasing rates could span up to five years and may extend to industries beyond just tech.

However, it's important for investors to avoid cherry-picking and instead focus on identifying undervalued companies across all sectors when the market is under stress. While healthcare, for instance, is often considered a solid prospect, it's essential to look for opportunities in a diverse range of industries to minimize risk.

If investors cannot dedicate time and effort to analyzing individual companies, investing in index funds can be a more suitable alternative, as these funds generally have a good balance of growth stocks and services.

Main takeaways:

• Decreasing interest rates will benefit companies and sectors that’ll manage to show positive growth trends.
• Follow the golden rule of investments! Don’t put all your eggs into the same basket. Investors must identify undervalued companies across all sectors rather than cherry-picking only well-known industries.
• Investing in index funds can be an alternative for those unable to dedicate time and effort to analyzing individual companies, as these funds often have a balanced mix of growth stocks and services.

What is the best time and currency to make a deposit?

The tech sector is currently facing an environment where the risk of liquidation seems higher than the prospect of interest rates going down.

With this in mind, investors need to be cautious when making decisions about their investments, especially in terms of periods and currency choices.

Main takeaways:

• Pay attention to what periods are available for your deposits, and choose wisely.
• Interest rates are expected to decrease over the next six to 12 months, investors need to consider the period for their deposits and the currency in which they judge their returns.
• A longer deposit period, such as 12 months, might be more beneficial if interest rates go down. If judging returns in euros, it might be better to invest in euros as depreciation in other currencies could compensate for any interest rate differences.