Experienced investors typically approach risk assets with a long-term view, utilizing short-term volatility to invest in themes they believe will pan out over years to come. While financial markets have been anything but predictable in recent months, here are five investment themes that have the potential to drive markets in 2023 and beyond. As always, investing involves risk and it is crucial to consult with your advisor as well as consider your financial goals and risk profile before making investment decisions.
1. Digital Transformation
The COVID-19 pandemic was a major catalyst for digital transformation across the global economy, accelerating the need for individuals and businesses to adopt technological solutions as they navigated uncharted territories. With the depths of the pandemic in the rearview mirror, many of these innovations are here to stay. Cloud computing, e-commerce, digital and contactless payment solutions, communication and collaboration technologies, as well as cybersecurity and data privacy are all services that will likely be needed for years to come and remain attractive investment opportunities.
2. AI & Automation
Building on the momentum from digital transformation are growth opportunities associated with artificial intelligence and automation. The need to increase efficiency, as well as deal with the ongoing labor shortages across sectors, are incentivizing corporate investments in technologies that can replicate human tasks and streamline processes. Advancements in robotics is wide ranging, impacting the healthcare industry with robotic surgery systems to the transportation industry with autonomous vehicles. The release of ChatGPT in late 2022 was a catalyst in demonstrating the potential applications of an artificial intelligence chatbot, and is poised to disrupt how many services are delivered today.
3. Healthcare
Healthcare innovations, an aging population and rising healthcare spending are all potential growth drivers in this rapidly evolving sector. During the pandemic, healthcare providers adopted remote delivery methods to treat patients. Digital solutions such as mobile health applications, virtual consultations, telepharmacy, mental health and therapy platforms, as well as remote monitoring and tracking tools gained popularity, offering access to healthcare while reducing strains on the industry. Furthermore, increasing life expectancies and declining birth rates have driven a demographic shift towards an aging population worldwide. While an older population raises various challenges, opportunities for the healthcare, biotechnology and pharmaceutical sectors cannot be denied.
4. Energy Transition
The ongoing effort to reduce carbon emissions is creating a growing need for sources of clean energy. The decarbonization movement will require investment to grow energy supply from solar, wind and hydroelectric projects. Beyond infrastructure investments, the growing fleet of electric vehicles will require manufacturers to source the critical components and materials needed to build batteries and sensors. This includes investments in materials such as lithium and cobalt, as well as semiconductors. This structural shift will force the United States and its allies to build capacity and make major investments as the supply for many of these materials are currently sourced from unfriendly locations.
5. India
Until recently the investing opportunities in India were often overshadowed by growth prospects available in China. However investors are taking notice of the attractive attributes available in the world’s most populous nation. India has a young, well-educated middle class the size of the U.S., that is poised to experience strong consumption growth as the wealth effect enables Indians to spend on everything from household goods to insurance services. India’s democratic values and stable government align with those of trading partners in Asia, Europe and North America, positioning the country as an attractive nation with which to build commercial partnerships. Foreign investment in the country has been growing, particularly in the technology sector by global leaders such as Alphabet and Apple.
