As Europe experiences one of its most difficult years in recent memory, we look to gain some useful insights into the biggest challenges and leading economic trends facing the EU and the wider world today. With this in mind, we sat down with Libertex Group CMO Marios Chailis to discuss these key issues, how Libertex is adapting to them, and how they are likely to affect the company's millions of traders and investors worldwide.
It's no secret that Europe and, indeed, the world have seen better days. What do you think is behind the current economic pain?
I think many of us expected that once the coronavirus pandemic was over, the world would suddenly spring into a new cycle of economic prosperity, but unfortunately, it proved not to be so simple. You can't just close down entire economies, print unprecedented amounts of new money, shut down supply chains, and then expect everything to go back to normal at the drop of a hat. Inflation was an inevitable side effect of the unbridled quantitative easing undertaken by global central banks, and the effect on ordinary consumers in terms of price rises has been rough, to say the least.
Now that the Fed and ECB are actively tightening their monetary policies, risk assets are finding it difficult to make fresh gains. Energy insecurity due to geopolitical uncertainty has also taken its toll, both on the business and manufacturing sectors, as well as ordinary consumers. Then, there was the generational return to EUR/USD parity, which made already costly USD-traded imports even more expensive. Just when it looked like things couldn't get any worse, we now have two high-profile bank collapses in the US and almost another in Europe. The bankruptcies of SVB and Signature and the near-miss of Credit Suisse in Europe have investors concerned that a repeat of the 2008 Great Financial Crisis might be in the making. It's certainly a challenging time at the moment.
You paint a bleak picture of financial markets. How long exactly do you expect the downturn to last?
The situation on the market doesn't look very positive just now. That much is true. But investors would be wise to remember that opportunities can be found in any climate. As a CFD broker, for instance, Libertex is able to offer both long and short positions, which enables traders to potentially make money even in bear markets. Having said that, we should never forget, however, that trading also involves risks, and those risks are often quite high. So, trading should never be taken lightly. Libertex offers a risk-free demo account that allows new traders to test out the platform before risking their own capital.
That said, we have already seen huge percentage losses (up to 70%) in some sectors and over 30% on major stock indices like the S&P 500, Nasdaq and DAX. Many people who are older and wiser than I have tried to call market bottoms and have been humiliated, so I will refrain from joining their ranks. However, I will say this: stocks have fallen significantly from their all-time highs, and major indices like the ones mentioned above seem to have cemented 10% gains over the past six months, which would appear to suggest that the worst is behind equities.
As always, investors should remain well diversified across asset classes to ensure that they are insulated from major drawdowns in any individual sector, but I think it's safe to say that current US tech stock prices look extremely attractive today compared to 2021 and that dollar cost averaging is always a sound method of ensuring maximum returns over time. That said, we at Libertex still firmly believe that Europe will recover. If we didn't, we wouldn't be opening a new representative office right in the financial heart of the EU, Germany.
Getting your feet on the ground in Germany is quite an exciting development! Could you tell us more about how this fits in with your general strategy and what it means for Libertex's EU-based clients?
It's no secret that Libertex has always been focused on providing a localised service tailored to the individual needs of all of its clients across the world. This is, of course, a huge challenge for a company with a global presence, but one that we have identified as crucial to our brand's ongoing strength and future growth. As a Europe-centric broker with many years of success connecting EU-based traders and investors with financial markets, it was high time that we established a physical location in the centre of the Old Continent.
We have long been present in Cyprus, having been regulated under CySec since 2012, but we felt that a physical presence in Europe's largest economy was the best way for us to reach even more German-speaking traders and investors as possible. This will complement our other well-known initiatives, such as ultra-tight spreads and low-commission trading, free educational materials, and, let's not forget, our international sports sponsorships. Our partnerships with football giants FC Bayern and Tottenham Hotspur and FC Bayern as their Official Online Trading Partner are of paramount importance to us, while they fit nicely into our "Trade for More" philosophy.
In your opinion, what are the biggest trends to watch in trading and investing this year, and how is Libertex adapting to them?
After a disastrous 2022 in terms of both price declines and the drop in retail investors' risk appetites, we expect to see a normalisation of market activity in 2023, especially in equities and other risk assets. Apart from the evidence I already touched upon indicating that stocks have plateaued, we are also seeing record-high employment rates in both Europe and the US. The upshot of this is that workers have more bargaining power for better wages and, thus, more disposable income to invest in more speculative instruments. Following a year of lower lows and general economic pain, many feel that the worst is behind us and are looking to pick up quality assets at knock-down prices. When you couple this with the sharp uptick in young long-term investors during the pandemic, we predict a large swing towards buy-and-hold investing among our clients this year.
That's precisely why Libertex has been developing Libertex Invest. This new account type even pays dividends and thus appeals to the increasingly value-oriented breed of millennial and Gen Z investors. Even in the context of increasing savings rates in the face of hawkish monetary policy, Libertex Invest will still offer competitive yields and good risk-to-reward coefficients for savvy savers with a moderate appetite for risk.
We all remember the huge bubble of 2021 and the subsequent slow decline over the following year, but what's the current state of crypto? Are digital assets dead, or are we likely to see new highs in 2023?
While it's true that cryptocurrencies took a big hit last year, I would venture to say that it was nowhere near as catastrophic as many people made it out to be. At its lowest point of $16,147 in November 2022, Bitcoin had fallen by about 75% against the dollar. However, we would do well to bear in mind that the dollar outperformed all currencies during this period. In fact, it was right at this time that the greenback recorded its historic above-parity exchange rate with the euro, which was a paradigm-shifting development that rocked global forex markets. And that's without mentioning the fact that many US tech stocks, such as Paypal and Tesla, also recorded similar losses, and nobody has written them off. Unlike Paypal, Bitcoin has now regained significant ground and currently sits at around $25,000 (over 50% above its local low). Aside from retail investors, traditional smart money also seems confident in a Bitcoin resurgence as weekly inflows continue to hover around $17 million.
Here at Libertex, we have long recognised the paradigm-shifting significance of digital assets, and nothing has changed for us in this regard. That's why we continue to add additional coins and tokens to our already extensive offering of over 100 crypto CFD pairs. We also provide 0 commission fees with ultra-low spreads on all crypto CFDs, regardless of the market situation.
About Libertex
Part of the Libertex Group, Libertex is an online broker offering tradable CFDs with underlying assets being commodities, Forex, ETFs, cryptocurrencies, and others. Libertex also offers investments in real stocks.
Over the years, Libertex has received more than 40 prestigious international awards and recognitions, including “Best CFD Broker Europe” (Global Brands Magazine, 2022) and “Most Trusted Broker in Europe” (Ultimate Fintech Awards, 2021). Libertex is the Official Online Trading Partner of FC Bayern and Tottenham Hotspur, bringing the exciting worlds of football and trading together.
Since being founded in 1997, the Libertex Group has grown into a diverse group of companies, serving millions of clients from several countries all over the world.
In Europe the Libertex trading platform is operated by Indication Investments Ltd., a Cyprus Investment Firm regulated and supervised by the Cyprus Securities and Exchange Commission (CySEC) with CIF License number 164/12.
For more information about Libertex visit www.libertex.com
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.9% of retail investor accounts lose money when trading CFDs with this provider. Tight spreads apply. Please check our spreads on the platform. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.