Key investment trends to watch for in 2023

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Trends change all the time. It doesn’t matter whether we talk about fashion, technology or online gaming, things tend to change with the times. Take online gaming for instance. These days people are just as interested in watching other people play games as they are playing themselves, and some games have dedicated communities and fans that share ideas and even strategies. Detailed online guidebooks such as Crazy Time strategy guide are highly popular in the gaming world currently as they allow players to quickly learn everything relating to a new game, in one place.

Investments are no different. In this article, we’ll delve into the key investment trends that are gaining momentum in 2023, providing you with valuable insights to help navigate the ever-changing financial markets. From the rise of sustainable investments to the growing influence of technology and the expansion of online casinos, these trends will shape the investment world in the coming year and beyond.

The Growth of Online Casinos

The global casino industry has emerged as a significant investment trend, driven by evolving technology, changing consumer preferences, and the increasing popularity of online gambling. With the continued growth of the digital economy and a shift in gaming habits, investors have started to recognize the potential of this booming sector.

One of the primary factors contributing to the growth of casinos as a key investment trend is the accelerated adoption of online and mobile gaming platforms. An increasing number of established casino operators and startups are investing heavily in innovative technologies, aiming to capture the growing market share.

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The Return of Bonds

The allure of fixed-income bonds has made a comeback, with yields reaching their highest levels in recent years, making this asset class an attractive proposition. Portfolio managers of a prominent multi-asset fund explain that the increased bond yields in 2022 have created an appealing entry point for both government bonds – which are expected to regain their status as a traditional safe-haven asset – and corporate bonds, where investors are now sufficiently compensated for potential default and liquidity risks.

The income generated by bonds is now attractive, a feature that had been absent for some time. Banking sector bonds, in particular, are appealing due to the industry’s strong earnings and solvency. However, certain sectors face more daunting prospects, such as real estate companies still grappling with the lingering effects of the global downturn and contending with increased refinancing costs.

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A Renewed Interest in Mega-Cap Stocks

Throughout much of 2022, mega-cap technology stocks – those with market capitalizations far exceeding the $10 billion benchmark for large-cap stocks – were highly favoured by investors. This popularity was partly driven by the widespread adoption of index investing, which often assigns weightings based on market capitalization. However, shifts in the macroeconomic landscape, such as rising inflation and interest rates, led investors to reconsider their positions. Consequently, the 10 largest stocks in the S&P 500 experienced a combined loss of $4.9 trillion during 2022.

Despite market scepticism regarding the resurgence of mega-cap internet stocks, some financial analysts predict they could regain strength in 2024 and beyond. The determining factor may be the incremental return on investment generated by artificial intelligence and machine learning technologies.

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Private Markets Poised for Long-Term Expansion

Private equity, venture capital, real estate, and other private markets have enjoyed a steady influx of capital and impressive relative performance for several years. Given the challenging macroeconomic climate, investors may understandably be concerned about the future prospects of private markets. While financial analysts anticipate somewhat modest growth in the short term for this sector, the long-term outlook remains promising.

The $10 trillion private markets industry has the potential to grow at a compounded annual rate of 12%, reaching $17 trillion in assets over the next five years. This optimistic long-term forecast is based on factors such as increasing allocations, the emergence of new growth engines, and the historical track record of private markets consistently outperforming public markets.

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European Construction Boom

Construction typically performs in line with the economy, but demand for construction materials and products has improved even amid weak economic growth. This surge can be attributed to a significant increase in energy-efficient construction and renovation projects. Over the past three years, there has been a fundamental shift in Europe’s dedication to enhancing energy efficiency in the building and construction sector.

Government budgets and funding packages are now being channelled towards energy-renovation upgrades, bolstering demand at a time when related stocks are trading at considerable discounts. Companies poised to benefit the most from this trend are those that provide products and services designed to enhance energy efficiency by improving a building’s “envelope” – the roof, walls, and windows of a structure.

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Prolonged Bear Market Possibility

The impressive stock market came to a sudden halt in June 2022, marking the onset of the second bear market since 2020 and prompting investors to seek shelter. Although stocks officially emerged from the bear market during the latter half of 2022, stock markets continue to experience double-digit declines.

Under normal circumstances, bonds would offer some relief during a bear market. However, due to aggressive interest rate hikes, bond yields have also dropped along with stock prices. In the third quarter of 2022, the once-reliable 60/40 portfolio experienced greater losses than its stocks-only counterpart, raising doubts about the effectiveness of the traditional portfolio mix.

The recovery of investor sentiment will likely depend on the alleviation of inflation, making the upcoming year potentially challenging for conventional asset allocation models. While adhering to a “buy low” strategy might still be a wise approach, 2023 could demonstrate that buy-and-hold investors require more than just equities and fixed income to safeguard against uncertain market conditions.

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Cryptocurrency Recovery

It’s reasonable to assume that 2023 could be a more favourable year for cryptocurrencies than 2022, which was characterized by significant challenges. In 2022, several stablecoins, such as TerraUSD and Tether, lost their pegs, contributing to a mid-year crypto crash that erased hundreds of billions of dollars in value. Additionally, crypto exchanges experienced growing pains and layoffs (as seen with Coinbase), along with the unexpected collapse of FTX.

As we enter 2023, expect cryptocurrency businesses to attract investors by emphasizing their cash reserves rather than promoting trendy coins and celebrity endorsements. Also, watch for significant developments in cryptocurrency regulation from Washington, D.C. In mid-November, the Federal Reserve initiated a 12-week central bank digital currency (CBDC) proof-of-concept project, and lawmakers are eager to progress crypto regulatory legislation. However, discussions surrounding blockchain technology may be overshadowed by FTX’s downfall rather than its long-term untapped potential.

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Asia Set for Strong Performance in 2023

Investors have been hesitant to embrace China and other Asian markets, as well as those in Australia and New Zealand, partly due to concerns that central banks will increase interest rates and hinder growth.

However, a differing perspective is presented by financial strategists who believe that a combination of more favourable financial conditions and robust balance sheets will bolster domestic demand strength in Asia. Additionally, China’s economic reopening is expected to provide a significant boost, resulting in Asia outshining other regions in terms of growth in 2023.

Furthermore, many Asian markets have been historically undervalued. When a bullish stance on Asian equities was first adopted late in the previous year, valuations were 40% below their peak in early 2021.

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Renewed Focus on Renewable Energy

The historic $1.2 trillion infrastructure bill of 2021 and the Inflation Reduction Act of 2022 have made trillions of dollars in federal investments available for renewable energy projects. Although supply chain disruptions hindered clean energy developments, such as electric vehicles (EVs) and solar panels in recent years, 2023 could be a highly favourable year for renewables.

BDO Global predicts a breakthrough year for renewable energy storage systems, closely linked with the adoption of battery storage and EVs. The entrance of newcomers like Rivian, Lucid, Ford, and Chevy into the EV market could challenge established players like Toyota and Tesla. Moreover, natural gas shortages resulting from conflicts within the European Union have accelerated policy momentum for clean and renewable energy sources.

As we progress through 2023, the investment landscape continues to transform, influenced by shifting economic, technological, and social factors. Staying up-to-date with the latest investment trends is essential for astute investors who wish to capitalize on opportunities and make well-informed decisions.