For most investors, 2022 has been an extremely challenging year. The threats of inflation and possible recession have been ever present, and the attempts of the Federal Reserve to control the former while avoiding the latter through fiscal tightening have added further complexity.
If you have been bewildered by some of the events and changes of the last 12 months, now could be a good time to brush up on some of the basics of economics and find answers to those nagging questions that you always wanted to resolve, such as what is deflation and how GDP is calculated. Making sure you have an intuitive understanding of the basics of economics is essential in today’s volatile economy.
The challenges that are likely to lie ahead in 2023 do not mean, however, that there are no investment opportunities out there. Here are five sectors that could reward investment over the next year.
The science of biotechnology involves modifying living things to produce useful goods. Many of these goods are used in fast-growing sectors of the economy, including biodegradable plastics, environmental applications, biofuels, food and agriculture and healthcare. The development of novel medications that have the potential to save lives for decades to come is particularly dependent on biotech products.
Some analysts have predicted that the global biotechnology market is set for huge growth throughout the rest of the decade, and many investors are taking an interest in this area. The significant investment potential of this sector, does, however, come with higher dangers. Biotech investing options are often speculative so if you are looking for more reliable and steady returns, there may be better options.
Some estimates suggest that the global AI market, which includes everything from predictive analytics to natural language processing, could grow to over $309bn by 2026.
AI has the potential to impact several economic sectors, including data analytics, marketing, manufacturing, logistics, HR and many others. The development of AI-powered VR, robotics, autonomous vehicles and chatbots are just a few examples of the ways in which this technology is being implemented.
As with biotechnology, it is important to be aware of the risks when investing in AI. This is a fast-evolving field in terms of technology, uptake and oversight, so it is important to stay flexible and adapt to industry and regulatory changes as they occur.
For investors, the US healthcare industry still has a lot of potential. The impact of healthcare innovation in 2022 was constrained by low current profitability, but the long-term outlook for healthcare is encouraging, with steady demand and several late-stage trials coming to fruition in 2022–2033, in areas such as gene therapy and neuroscience.
It is noteworthy that health expenditure in the US has risen in all but one of the past 50 years, so this sector could offer plenty of opportunities at a time of economic instability.
Although supply chain problems have been an issue in the renewable sector in recent months, the outlook for 2023 appears to be more promising.
There is no doubt that climate change will be a huge driver of investment and development over the next few years, and the $1.2tn infrastructure package of 2021 and the Inflation Reduction Act of 2022 both indicated how committed the US federal government is in encouraging this sector.
In this market, electric vehicle (EV) manufacturers are at the forefront, and the primacy of Tesla and Toyota is likely to be threatened by fierce competition between companies such as Rivian, Ford and Chevy. The persistent natural gas shortages in the EU brought on by Russia’s invasion of Ukraine have also increased the demand for renewable energy sources.
The focus on cybersecurity will likely continue to rise for the foreseeable future, due to the rapid speed of digital transformation and the rising cost of internet data breaches, making this another of the top growth areas to invest in this year.
The market for information security was expected to pass $170bn globally in 2022 and includes everything from cloud security to infrastructure protection. If you want to invest in this area, it is important to make sure that you fully grasp the basics of the technology and of the regulatory factors associated with the industry. This economic sector moves quickly, so you will need to be flexible enough to identify the best opportunities among a host of competing companies, all with the potential for growth.