Black Swan and the Market 2023: The Inevitable Uncertainty

Unexpected events often quickly change the direction of financial markets. This is something investors must be aware of and prepare for. This phenomenon is called the “Black Swan” or หงส่ดำ, an unpredictable event in the financial world.

The Black Swan Phenomenon: The Impossible Becoming Reality

In ancient times, humans believed that swans were only white. This story changed in 1697 when Dutch captain Willem de Vlamingh discovered a black swan in Australia. Since then, the black swan has become a symbol of what humans thought was impossible but can actually happen.

In the finance sector, economist Nassim Nicholas Taleb published the book “The Black Swan: The Impact of the Highly Improbable” in 2007 to explain unpredictable market movements. This theory has three key characteristics: it is beyond expectations, has a massive impact, and after it occurs, people try to explain it.

From Theory to Reality: Current Black Swan Events

COVID-19 Crisis: Global Market Shake

Late 2019, the COVID-19 virus appeared in China and spread worldwide. The decision to impose (Lockdown) measures, though health-protective, hit the economy hard. Up to 90% of private sectors shut down. The US economy faced deflation, and unemployment soared. Many companies delayed investments. This is a classic example of a black swan changing the world.

Russia-Ukraine War: Direct and Indirect Effects

The military conflict between the two countries caused unexpected rises in energy, metals, and agricultural commodity prices. Thailand was directly affected by rising oil prices, increasing living costs, and higher fertilizer prices due to natural gas price hikes. The US dollar appreciated to an all-time high, causing other currencies including the baht to weaken.

Thailand’s Foreign Reserves Decline

From a peak of 10 trillion baht at the end of 2021, reserves fell to 8.8 trillion baht, a loss of 1.3 trillion baht or $32 billion. The main reasons are lower investment returns, asset revaluation, and the Bank of Thailand’s interest rate hikes. As the dollar strengthens, asset values in dollar terms decrease. This signals Thai investors to be cautious.

Market 2023: The Next Black Swan Trigger

Recession: Do You Know?

Many global organizations estimate that the world economy will enter a recession in 2023. The US, EU, and major countries face economic issues. The ongoing Russia-Ukraine war continues to impact inflation. Countries raise interest rates to control inflation, but this slows economic growth.

In Thailand, employment remains stable with 490,000 unemployed (1.23%), and inflation averages 6.1%. GDP in Q4 2022 grew only 1.4%. The Thai economy is projected to grow 2.7-3.7% in 2023, supported by tourism and domestic consumption.

Stock Market and Interest Rate Hikes

Thai stocks are expected to improve as the economy recovers, inflation subsides, and tourism benefits from reopening. Retail sectors continue to recover since Q2 2022.

Gold Prices and Currencies

Gold is expected to trend upward in 2023 because of improving economies in India and China, which account for 50% of global gold demand. China may grow 3-5% and relax Zero-COVID measures, boosting jewelry demand. The target price is around $1,900 per ounce; if sustained well, it could reach $2,000.

The US dollar has started to weaken after US inflation eased more than expected. The pound sterling strengthened, marking the first such occurrence in 6 quarters, indicating a long-term contraction.

Cryptocurrency: Uncertainty Remains

The crypto market has faced several black swan events, such as Bitcoin dropping to $30,000 on May 19, 2021. Similar events could happen again if there’s a massive sell-off, reduced demand, or negative news. Bitcoin and other cryptocurrencies might see heavy selling. Investors should be cautious, even if the chances are low.

Defensive Strategies: Prepare for the Next Black Swan

Accept the Possibility of a Black Swan

Don’t panic excessively, but be aware that unpredictable events can happen anytime. Market movements show that the impossible often occurs.

Capitalize on Price Declines

When a black swan occurs and prices fall, it’s the time investors wait for. Invest in fundamentally strong companies that can survive crises. When markets recover, your portfolio value will increase again. Turn crises into opportunities.

Diversify Investments Wisely

The most important thing is risk diversification. Relying on a single asset class makes you vulnerable to black swan impacts. Invest in stocks, bonds, precious metals, gold, and real estate in a balanced way to reduce risk.

Use Risk Management Tools

Options (Options) and futures (Futures) are financial instruments that help hedge risks, allowing you to build a shield against losses and mitigate market uncertainties.

Maintain a Long-Term Investment Horizon

Although black swans can shake markets in the short term, history shows markets tend to rebound and recover over time. Patient investors with long-term plans usually succeed.

Summary: Black Swan is Not a Monster, But a Teacher

The Black Swan is not something to fear but an important lesson. Understanding its nature, accepting its possibility, preparing strongly, and having backup plans are key. Good strategies challenge your perspectives, encouraging you to foresee negative scenarios, stay mindful, and avoid recklessness.

Every crisis, no matter how big, can be turned from negative to positive. Black Swans serve as reminders to stand up and face challenges. Being prepared is more important than trying to predict, because what seems impossible may actually be more likely than we think.