Macro commentary by eToro analyst for Romania, Bogdan Maioreanu
For investors, the latest inflation data gave more confidence to move to a more risky approach. As a result, global markets recovered some of the losses from last year. But 2023 still carries some risks from the previous year economic and geopolitical situation.
The latest data for the December 2022 yearly inflation in Romania is showing a slight deceleration to 16.4%. But the prices still increased 0.4% month on month. 2022 was a year with high inflation with the average monthly increase in prices being 1.3% compared with 0.7% in 2021. If we are looking at how the different categories evolved we can see that the CPI of food increased 22% compared with December 2021, the non food goods CPI increased close to 15% and the services CPI increased close to 10%. The champion of price increases was sugar with almost 63% followed by butter with 45% and edible oil with more than 37%. The lowest price increases were in alcoholic beverages like “tuica, rachiu” and other beverages with only 9%. In the non-food category, the champions were electricity with 45%, natural gas with 36% and railroad transportation with 21%. However, the prices decreased for the telephone services.
At the European level, December inflation data brought a slowdown for most countries that reported, including the Eurozone, with few exceptions. The largest increases in annual inflation were in Hungary that showed an increase with 2% to 24.5% and Sweden with 0.8% to 12.3%.
Inflation in the United States in December slowed considerably to 6.5%, which shows the economy is getting back into balance without seriously harming the job market. This looks to fit the definition of a soft landing, and it’s adding to the pile of evidence the Fed needs to let up on rate hikes and aggressive policy. But there are still risks ahead, services inflation still hasn’t peaked, and that’s the kind of inflation the Fed wants to get under control.
At global level, the stock markets recovered 3.3 trillion dollars in market capitalisation last week. The narrative of soft landing instead of recession is gaining momentum among the investors. However, there are still a lot of risks this year, most of them carried from 2022, like the conflict in Ukraine and its influence on energy and prices. The latest risk report of the World Economic Forum is seeing the cost of living crisis as the main risk for the next 2 years period, followed by natural disasters and extreme weather effects and geoeconomic confrontation. All these are impacting global economies.
For investors, inflation continues to be the main risk according to the latest eToro Retail Investor Beat survey. And the latest positive inflation data can easily make the markets go euphoric but investors need to be careful because inflation still isn’t fully handled. There are still too many unknowns along the way.
Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.
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