Investors have a chance despite the risk of a “financial accident,” according to a strategist.

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According to Beat Wittman, chairman and partner at Zurich-based Porta Advisors, the likelihood of a “great financial accident” that results in a market collapse later in the year is rising and could present opportunities for investors.

According to Wittman, monetary policy and liquidity conditions had been “too lax for too long” before central banks were compelled to start tightening this year. As a result, officials, including the U.S. Federal Reserve, are now attempting to regain lost credibility.

According to Beat Wittman, chairman and partner at Zurich-based Porta Advisors, the possibility of a “great financial calamity” that results in a market collapse later in the year may present opportunities for investors to “load up on quality risk assets.”

Wittman described the state of the world economy as “stuck in a perfect storm environment of supply chain frictions, contracting final demand, high inflation, rising interest rates, falling corporate earnings and a potential financial accident,” with risks from inflation and an economic slowdown mounting and central banks treading an increasingly constrained monetary policy path.

According to him, there is a chance that a “weak link” in the financial system may fail and cause a wave of investor exodus, opening up investment opportunities for astute investors.

He wrote in a research note, “The list of weak-links prospects is very large and includes zombie-type European universal banks, LBO-financed corporates, over-leveraged shadow banking entities, and over-indebted developing market sovereigns.

We shouldn’t undervalue the fact that interest rates have increased significantly over the past six to nine months. Higher interest rates are eating away at the economy and have an effect on consumer and business confidence as well as anyone with leveraged exposure to those rates and insufficient cash or reserv.

With major exceptions like China and Japan, central banks throughout the world have aggressively tightened monetary policy in recent months in an effort to slow the rate of inflation, which has been stoked in part by the Russian military conflict in Ukraine and rising food and energy costs.

According to Wittman, monetary policy and liquidity conditions had been “too lax for too long” before central banks were compelled to start tightening this year. As a result, officials, including the U.S. Federal Reserve, are now attempting to regain lost credibility.

Their tightening will have lingering and protracted negative economic impacts. On the other hand, a long-term normalisation of monetary and interest rate policy is a much-needed and positive development,” he remarked.

He also pointed out how starkly different the U.S. and Europe are geographically, with the former being more energy independent and far more protected against import and export risks connected to the conflict in Ukraine, along with the Fed setting the standard for monetary policy.

“From a geopolitical, energy security, economic resilience, and monetary policy leading viewpoint, the U.S. equity market is best positioned looking towards 2023,” he said.

Another important point is that remarkable business and investment opportunities thrive in times of emotional, intellectual, and financial upheaval.

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