Monday 2 January 2023

Publicly Traded Materials Stocks - 2022 Performance and Outlook for 2023 - Is the Global Recession on its Way?

Hello and welcome back to a new blog post in this fresh year of 2023! I hope you had a successful start into this new year. 

Again, materials companies were hit hard in 2022: from supply chain disruptions due to Covid lockdowns in Asia, the Ukraine conflict with its impact on engery prices, in particular Europe and global inflation continued to increase (Eurozone around 10%; North America around 9%).

Looking at the financial markets, the situation is similar. The S&P 500 finished 2022 with -19 % for the year and the NASDAQ composite decreased -35 % in 2022. The Vanguard Materials Index Fund ETF made also -11 % in 2022. Altogether, only 1 of the 11 main sectors was up double-digits (Energy sector + 58%). All the other sectors performed negatively and Communication Services had -14 % the biggest decrease. 

Performance of 30 major material stocks - How did the 30 major material stock companies perform in 2022?

5 out of the 30 stocks could make gains for their shareholders (date of estimation: 02.01.2023) and this is 20 less compared to 2021. Cabot and Hexcel Corp. were in the lead with double digit gains.

Performance of 30 major material stocks 2022

Higher energy costs in Europe impact companies such as BASF which considers future investments outside Europe. Not only in Europe things are shaking. Globally we see shocks in geopolitics, energy and economics which accelerates the probability for a global recession. Predictions for global growth is 2.7% in 2023. This projection was done by the International Monetary Fund and would represent the weakest year for the world economy since 2001 (excluding global financial crisis 2008 and Covid pandemic 2020). 

Staying focused for 2023

For sure we will see much slower growth and if a recession can be avoided, material companies will still have several challenges to face (energy prices, supply chain, to name a few).

We know that economy moves in waves and it is important to stay focused during the down-wave. 

What plastics businesses can do in such times: 

-build up the cash reserves and reduce debt; 

-follow the old saying: "when times are good, prepare for tough times".

-keep an eye on future and mega-trends; the next up-wave is around the corner

-diversification due to several income streams

-protect the existing customer base 

-continue to innovate and keep up the quality over quantity

-as a small company: find partner and make it together due to hard times by sharing certain assets and skill sets

Thanks for reading and #findoutaboutplastics



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