ArticlesMarket CommentaryThe Year Ahead 2023

The Year Ahead 2023

2023 written in sand

Happy New Year! Hope you had an enjoyable holiday season!

After a couple week hiatus, we are doing a special post about the year ahead. What should you look out for in 2023? I took special effort to highlight things that are unlikely to be on your radar this year. Why? Because those are frequently the things that are going to be undervalued by the markets…Until they aren’t.

I’ll also go a bit more in depth as to why it matters since most people are not paying that much attention to these topics. Lastly, I’ll summarize the outlook for the year from a US perspective.

So let’s get started. The top 3 less common things to watch out for in 2023:

  • Rise of Nuclear Energy
  • Food Security
  • Zero Trust Cyber Security

Rise of Nuclear Energy

Nuclear energy has certainly not been on the receiving end of the green energy hype in the last few years. Despite that fact, nuclear power: 

  • can provide cost effective base load power 
  • can scale energy output based on demand
  • is over 1 million times more energy dense than the next common fuel source

Source: xkcd

So why so little love? I think it comes down to sentiment. Just like people have a fear of flying in airplanes, most people visualize the catastrophe scenario (think Chernobyl). Planes have overcome this partly because the experience is very salient. You need to go from A to B, the alternative is a one month boat ride. You take the flight, nothing happens. So the benefits are very tangible and real, and you learn to be less afraid. 

However, the benefits of nuclear power are less direct. You either live in an area serviced by nuclear power, or not. And even if you did, you probably wouldn’t know that your power came from a nuclear power plant. You may get higher or lower energy bills based on your municipal tax policies, but you have no way to switch power sources like you switch your telephone service so you can’t even compare directly.

Furthermore, in a developed country, you get power regardless of where you live, and you can’t tell what the alternative is with nuclear power, so the only thing left in your mind is the disaster scenario of a nuclear fallout which doesn’t exist with other fuels.

Ok, but what about nuclear waste? Yes, nuclear fuel stays radioactive for a long time, but it decays quickly, and within 40 years, the radioactivity of nuclear waste is reduced by 99.9%. On top of that, all of the nuclear waste ever commercially produced fits in a single football field. Surely we’ll figure out a way to manage.


Source: Madi Hilly/World Nuclear Association

So nuclear power is not so bad, but combine the above fears with the effort to greenwash our energy mix in the last decade or so and you get absurd situations such as decommissioning nuclear power plants and causing power shortages in New York. An even more egregious example of this is Germany burning wood for fuel to replace lost power from decommissioning nuclear power plants. Why? Because apparently burning wood is carbon neutral according to the EPA (but…it’s not). 

Even if we suppose it was for a moment, in our handy chart above, the energy density of wood is on par with sugar, it really just isn’t that efficient of a fuel source. How can incentivizing more deforestation be the answer to climate change?


So what’s changed in 2022? The Russia/Ukraine conflict has put energy shortages at the forefront of everyone’s minds. Some businesses have been getting energy bills sometimes 10x more than the year before, putting them out of business completely. 

Needless to say, the shift in sentiment has been swift with many countries now embracing nuclear power and planning to boost capacity in the next few years. In the last decade, the number of new plants has barely been able to keep up with replacing aging ones. However in the next couple decades, new plants will outnumber the replacement rate by 3 to 1.

The US has not been at the forefront of this development given the high regulatory compliance costs along with the aforementioned anti-nuclear sentiment. Despite having the most installed nuclear power plants in the world (92 as of 2021), it has no new construction planned for the next decade

This trend is reversing in 2023. Capital formation is particularly nimble in the US and with both the technical expertise and liquidity to fund large projects across the globe, the US could be an even more dominant player for new construction in the years to come.

Food Security

For most of the developed world, food prices have gone up last year. It has stung and caused many to change their spending habits, but for the developing world, it has been devastating. For the last 20 years, the world has made great strides to eliminate hunger, but the trend has been reversing last year due to the surge in basic food costs brought about by the Russian/Ukraine war.

Source: World Bank

Despite coming down from their highs in 2022, prices were still 20% higher at the end of 2022 than where they were at the beginning of 2021. In 90% of countries, food inflation has far outpaced overall levels of inflation last year. With many poorer countries spending a huge percentage of their incomes on food, it’s becoming a huge problem.

Moreover, for a long time now, the world has produced meaningfully more food than is required to feed humanity. The fact that people still go hungry is mostly a political problem.

The reason it’s more of a problem now is that supply itself is also shrinking, with wheat being the biggest commodity affected by the war.

Source: The Economist

2023 will mean the reconfiguration of established trading relationships. But given the critical nature of food staples, there will be political pressure to restrict exports in dire situations. Combine this with volatile harvests due to climate change, and we could see a replay of 2022 if the war becomes a protracted conflict.

Zero Trust Cyber Security

This is a topic closer to the heart. The idea is that instead of having “trusted zones” within a company’s network infrastructure, applications and internal tools must be built without assuming they are operating in a trusted environment.

It’s akin to having a security guard standing in front of every door in an office building instead of just one at the entrance. The risk of every request to access a system is evaluated based on its context, which could mean the person, the nature of the request, frequency, location, service etc.

How important is this? Well, even the US government has deemed it important enough to issue a memo requiring agencies to move to a zero trust architecture (ZTA) by 2024. And the government is usually not known for their eagerness to adopt new processes, as evidenced by this law which still requires the use of floppy disks.

Within the industry, nearly 80% of IT professionals are considering such a model for their network infrastructure.

Source: AFCOM

This trend stands to accelerate as more companies adopt remote first policies with a globalized workforce from day one. Existing VPN technologies are not well adapted to serve a globally  distributed network since by design all traffic must pass through company data centers, causing huge bottlenecks.

Companies that stand to benefit from this change include identity management services such as Okta. They offer authentication and authorization SaaS to be embedded within a company’s internal infrastructure. This enhances security for both internal tools and customer-facing applications by providing ongoing monitoring as well as multiple authentication methods such as 2FA. If you have noticed many more services requiring you to turn on 2 factor authentication (2FA) lately, that’s precisely why.

With more applications moving to the cloud, 2023 could be the year where mass adoption of ZTA begins, dramatically improving the security posture for companies, as well as their customers.

2023 Outlook

Now onto the outlook. Needless to say, 2022 has been a rough year for investors, with literally nowhere to hide whether that be in stocks, bonds, crypto, or even cash. So what does 2023 look like? It boils down to:

  • There will be a mild recession in the US by the middle or second half of the year.
  • Nearly everyone expects the Fed to stop hiking within the first half, some even predict a cut by the second half.
  • US equities will likely remain above the Oct 2022 lows.
  • Energy and commodities prices are likely to remain volatile due to war and chaotic China reopening.
  • Real Estate will continue to struggle given the level of rates.

Other interesting developments: 

  • Localization of complex supply chains, particularly as it pertains to semiconductor manufacturing (TSMC building a plant in Arizona)
  • Increased regulation as it pertains to cryptocurrencies and digital assets (post FTX bankruptcy)
  • Normalization of central bank balance sheets and higher long end rates. (Fed is running off balance sheet in tandem with rate hikes)

That’s all folks! Is there anything that I’ve missed? If you have any thoughts or comments, please reach out!

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