Perspectives of a Financial Market Analyst: Interview with Finalto's Neil Wilson

Finalto, a fintech name that needs no introduction, is one of the fastest-growing financial services and technology groups the fintech space has seen in the last half-decade, with a solid footprint in both the B2B and B2C sectors.

Witnessing resounding growth in its B2C business, the company has managed to establish itself as an industry thought leader and provider of well-rounded market analysis authored by reputed analysts in the financial media circles.

We recently had the pleasure to sit down with Neil Wilson, Chief Market Analyst at Finalto. Neil is a financial journalist and market analyst with an outstanding reputation. An active collaborator of CNBC, BBC, ITV, Sky News, Bloomberg, Reuters, The Times, Telegraph, The Guardian, and many other top-tier TV networks and media outlets with a global reach, he is one of the few perceptive market “readers” able to translate data into comprehensive insights. So, we pried him away from his busy schedule and asked him a few forensic questions about the possibilities that the future may hold.

Thank you for joining us, Neil. Tell us a little bit about yourself. What brought you to Finalto?

Always a pleasure. It’s been quite an exciting journey. After several years in the industry and a spell at ETX Capital as market analyst, I moved in 2018 to markets.com, which is part of the Finalto Group. For the last year, in addition to covering the retail angle with markets.com, I have also been more involved in the institutional side of the business.

2022 has been a pivotal year for the financial markets. What should investors look out for in 2023?

In 2023, investors should be looking for whether the world enters a global, synchronised recession. It’s also going to be about inflation again – the big topic of 2022 – and whether this comes down as sharply as hoped. Disinflation will be evident, but the risk is that inflation remains too high for too long, forcing central banks to do more. Against this backdrop, global growth is expected to slow down, touching 2.7 percent in 2023, which is the weakest growth profile since 2001. The global economy will likely reach a standstill next year, so we must be prepared, without panicking, of course.

Could we expect inflation to go higher?

It’s not a case really of going higher but staying elevated for longer. It can take years for inflation to come back down. We have seen a paradigm shift in terms of inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term, and this means it will remain high, in spite of everything the central banks throw at it.

You know, the global economy is a living organism, it has its own intricate way of functioning. Forecasts change from day to day, swaying to policy-making tides. For example, global inflation hit 8.8 percent in 2022 and is seen dropping to 6.5 percent in 2023, according to the IMF. But what will actually happen remains to be seen.

True. In terms of liquidity, do you sense the same shift in dynamics as the inflationary shift, for example? How does inflation affect liquidity Liquidity Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Read this Term, in your opinion?

There is an indirect linkage in that inflation forces central banks to tighten monetary policy, which, by its very intent and nature, reduces liquidity. A big question in 2023 revolves around declining liquidity and what effect quantitative tightening (QT) will have on the market.

QT is the opposite of QE, and the more CBs remove liquidity, the greater the chances of volatility and lower returns from stocks and bonds. While the inflation spectre is eerily taking shape as we approach the beginning of 2023, it is virtually impossible to accurately predict where the markets are headed.

Therefore, diversification is essential for the “health and safety” of any investment portfolio. This means preserving a healthy cash balance and minimising risk.

Is the Fed done hiking or not? Could you give us two scenarios - how will the global financial system be affected by a weaker or, on the contrary, stronger US Dollar, depending on the Fed’s increasing or maintaining interest rates?

No, the Fed is not done hiking. A strong dollar is bad for the markets, in general, translating to lower liquidity, imported inflation, etc. In contrast, a weaker dollar next year would be good for risk assets, such as stocks and perhaps crypto. But a stronger dollar would keep pressure on risk.

It’s still unclear now whether the dollar has peaked in this cycle. We will see soon enough. However, this will not prevent shorter or longer-term market rallies in between FOMC Meetings. After all, that’s where the serendipity of the financial markets lies.

In your opinion, what is the “secret” to rein inflation in? Have the world’s governments missed anything? What exactly?

There is no secret, really. Once the genie is out, it’s very hard to put it back in the lamp. The answer lies in the cause – the massive disruption to supply chains and demand caused by the pandemic coupled with the incredible amount of fiscal and monetary stimulus.

They poured way too much petrol on the fire and were way too slow to rein it back in. Not enough attention has been paid to currency instability, as a cause of inflation too, so whether the dollar retreats in 2023 will be an important factor for central banks and inflation expectations.

In three words, what does the embargo on Russian oil and natural gas mean for the world?

Swifter European transition. The way Europe has reduced reliance on Russian fossil fuels has been remarkable. There is still work to be done in that area, but Rome was not built in a day, as the saying goes, neither can EU governments cut ties with Russia suddenly. Resilience, patience and strategic thinking are called for.

Indeed. In your Watchlist 2023 financial market report, you speak about a crypto ice age. Can you briefly explain what you mean by that and whether you expect it to end anytime soon?

The crypto ice age refers to a prolonged period of flat to negative prices. Some talk about a crypto winter, but I wanted to get across just how big a shift we have seen in the crypto wild west because of several notable failures this year, particularly FTX. The ice age will last a long time – no one will be touching the vast majority of scam tokens for a long while.

Finally, behind all this gloom and doom, do you sense any positivity, and when could we expect an improvement in investor sentiment?

The best thing that can happen is that inflation really does come down and central banks declare victory. There is a better-than- zero chance of this happening. There have been signs of cooling in the last month or so, and if disinflation were to really accelerate, then the market can make major gains. An end to the war in Ukraine would be one big step to improve sentiment, but unless Putin is toppled, it’s hard to see anything other than a prolonged fight.

Thank you very much, Neil, for your time and the invaluable insights.

Thank you for having me, also. Big pleasure.

With inflation and global geopolitics taking centre stage, 2023 looks intriguing, challenging and a pivotal year for the financial markets. As major shifts loom on the horizon, commodities such as oil and natural gas will likely be on investors’ radar next year. For more insights on what 2023 has in store, download the full Watchlist 2023 report by Neil Wilson, Chief Market Analyst, Finalto.