10 personal finance predictions for 2023

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Susannah Streeter, Senior Investment & Markets Analyst, Sarah Coles, Senior Personal Finance Analyst, and Helen Morrissey, Senior Retirement Analyst at Hargreaves Lansdown, open the crystal crack for 2023.

  • table of contents Watch

    • 1. Inflation is set to remain constant

    • 2. You will pay more taxes

    • 3. Energy prices will continue to be volatile

    • 4. Your energy bill will go up

    • 5. Mortgage interest rates may go down

    • 6. Savings rates may fall again, too

    • 7. A downturn in the housing market is likely

    • 8. There may be less positive news for jobs

    • 9. We will continue to discuss the triple lock of state pensions

    • 10. We could see further hikes in the state retirement age

    Inflation will remain constant

    Susanna Streeter:

    “Substantial price hikes now appear to be in the rearview mirror, as data filtering indicates that the rate of price growth is slowing. But even though inflation may have peaked, that doesn’t necessarily mean it’s a smooth downward path from here.

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    There is still potential for a lot of pain to come, as stubbornly high prices continue to cause severe headaches for the economy. Although a recession would dampen domestic demand, many of the inflationary pressures were external, and with the Russian offensive in Ukraine continuing and energy prices appearing unpredictable, it is not certain how quickly prices will fall.

    The Bank of England has projected inflation to be around 5% by the end of 2023, but as always with projections, there are no guarantees.”

  • You will pay more taxes

    Sarah Coles:

    “The round of tax increases in the Fall Manifesto made for a miserable read, but even before that we were calling for higher tax bills, because freezing income tax limits means that higher wages will cause more people to pay more taxes — and drive huge numbers of people into tax bands.” higher.

    These types of stealth taxes tend to slip under the radar but can have a much bigger impact than a tax hike. The Institute for Fiscal Studies estimates that freezing personal tax thresholds will reduce household income by an average of £1,250 by 2025/26.

    Furthermore, the autumn statement brought bad news for top earners, as the additional rate limit was lowered from £150,000 to £125,140. For those who run their own businesses and pay themselves in dividends, and for investors with large portfolios outside of ISAs or pensions, there is also the threat of more dividend tax as benefits halve in April.

    For those investors, there is also the risk of a capital gains tax after the provisions were halved in April as well. When you add in the high council tax and the frozen inheritance tax difference, we’re hit with more taxation on all sides.”

  • Energy prices are set to remain volatile

    Susanna Streeter:

    “Uncertainty is coming in waves in energy markets as volatile waves of supply and demand drive up oil prices but sustain significant gains.
    There is an expectation that there will be less crude oil available for purchase
    Given the $60 cap on Russian oil, which means it can’t be shipped using EU or G7 tankers, insurance or lines of credit, unless it’s below that price cap.

    However, Russia has vowed to get around this by leasing tankers elsewhere, and it seems likely that large flows will be redirected to friendlier countries.

    OPEC+ has adopted a wait-and-see policy, before introducing any further change to its already low production targets.
    It is also unclear how the Covid situation in China will play out. Investors were clinging to hope that there would be a further softening of tough pandemic policies.

    A quick turnaround in China is unlikely given the expected rise in infections will be another major challenge to mobility, and once the economy reopens, demand for oil and gas is expected to pick up again. Gas storage facilities in Europe that used to be over 90% full are already falling short as the cold snap continues, and the energy security shock may have just been overdue, not averted.”

  • And your energy bill will go up

    Sarah Coles:

    “Through wholesale energy price volatility, the Energy Price Guarantee will keep energy prices in check until 2023. However, annual bills for the average user will continue to rise to £3,000 from April, and we will lose the total sum inclusive payments at that point too.

    It’s a far cry from the horrors we might have expected without the guarantee, and there would also be additional cost-of-living payments for those on tested benefits, retirees and those receiving specific disability benefits, which should help those who would struggle most with higher bills. However, for middle-income earners, we know we’ll get less help with expensive bills.”

  • Mortgage interest rates may drop

    Sarah Coles:

    “The low inflation expectations are good news for borrowers, because although interest rates are expected to continue to climb into the beginning of next year and reach around 4.5%. Assuming there is nothing unexpected lurking in the coming months, they are expected to ease back again. other soon as the recession continues.

    This lower-than-expected outlook is already feeding into lower fixed-rate mortgages, and we’re likely to see further declines.”

  • Savings rates may also decline

    Sarah Coles:

    “For savers, the news is less positive, because the outlook for lower interest rates has already seen some of the most competitive fixed-rate savings deals pulled, so we will likely see a pullback as we head into 2023.

    However, the good news is that with inflation expected to be around 5% by the end of next year and less than 2% in 2024, there is a chance that the best two-year fix can still beat inflation.

  • Possible downturn in the housing market

    Susanna Streeter:

    There will be some big shifts in the mortgage market next year as lending declines in the face of the cost of living crisis.
    Affordability is already being affected by the sharp rise in borrowing costs, which is making people more reluctant to take the next step on the housing ladder.

    UK Finance expects real estate transactions to fall by more than a fifth over the course of the year.
    This will see a return to pre-pandemic borrowing levels, but as buyers hibernate as the market freezes, house prices are set to crash.

    There is still hope that relatively high employment and a low housing stock will prevent a prolonged downturn. However, confidence has now taken a hit, buyers will not be returning to the market in such a rush, and there is a risk of a deeper downturn.

    The US housing market heading into 2023 is still in correction territory, and with optimism fading away, that could lead to further ramifications for the economy as the recession caused by falling house prices has historically been shown to be deeper.

    In China, too, the real estate house has not yet fully stabilized, despite recent efforts by the authorities to get banks to be more lenient on their lending standards.”

  • There may be less positive news for jobs

    Sarah Coles:

    “We have been used to a thriving job market in the past few years, so more people have had job security and plenty of alternative options. The picture is not expected to change drastically overnight, but we have seen unemployment rise slightly and job vacancies decline in the latest batch From the numbers, once the recession takes hold, we may see more uncertainty and insecurity pouring into the job market.”

  • We will continue to discuss the government’s triple pension lock

    Helen Morrissey:

    The decision to reintroduce the triple state pension insurance system was met with a sigh of relief by retirees who had been counting on getting a significant 10.1% increase in their state pensions from April. The decision to suspend her last year was seen by many as a first step toward getting rid of him in the long run, and the mixed messages that led to the mini-budget certainly didn’t help matters.

    Its return was announced during the fall statement, but it remains a divisive policy as many believe it is unfair to younger generations, and the escalating cost of providing the state pension will continue to fuel debate about the long-term future of the triple lock.”

  • We could see further hikes for state pension ages

    Helen Morrissey:

    “The government retirement age has risen rapidly in recent years and currently stands at 66 for men and women – with the shift to 67 by 2028. The timeline says the shift to 68 should happen by 2046, although the government has been open in saying that it It is believed that it should happen much earlier – by 2039.

    The timeline is subject to a state pension review due to be published early in the new year, in which the author needs to consider managing the blinding costs of providing a state pension against the fact that the rapid increase in longevity is slowing and many people simply cannot keep working for a while long.

    Rumors are already swirling that the schedule could be pushed back even further – perhaps to 2033 – a move that would cause consternation among many older workers.”

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