Investors that remain engaged in the market will likely continue to look at buying the dip in «growth» tech stocks, which will likely continue to deflate due to reduced traded volumes and ongoing institutional diversification.

Meanwhile, institutionals will find a target-rich environment in 2023 if the dollar trade gets less crowded: a rationalized dollar won’t induce selloffs by foreign central banks – a massive investor segment in US Treasuries – in order to stabilize their currencies. If the dollar weakens, EM Treasuries will also become very attractive. Added to this is a vast plethora of strong-performing stocks in EM countries and high-quality Investment Grade corporate bonds in the pipeline.

However, If the U.S. Federal Reserve decides to pivot on its aggressive rate cut policies or investment managers don’t continue exploring more sophisticated diversification strategies, the dollar trade will remain crowded which in turn will complicate the economic recovery cycle and exacerbate cost of funding for the U.S. government in its future debt issuances.

For retail investors that don’t simply buy in and wait but instead make tactical plays based on market dynamics, 2023 will be a stalwart year. Exchange-Traded Products (ETPs) provide magnified exposure while potential losses limited to only the invested amount and no further. Learn more about Exchange Traded Products that provide magnified exposure on either the upside or the downside of major markets, sectors and investor-favourite stocks here.