As 2023 has just begun, your investment wins and losses in the last year are also getting the opportunity to turn over a new leaf.
So how will you plan and choose your next investments? How will the supply chain issues, inflationary pressures and talent shortages of 2022 affect the next 12 months?
Despite economic challenges, we know that innovation is always a given, and businesses will no doubt find a way to adapt. As 2023 progresses, inflation will likely cool. Morgan Stanley predicts a sharp slowdown in growth in Australia next year but improved GDP growth in 2024, while the Commonwealth Bank expects a global recession in 2023, but sees central banks finally getting on top of inflation and a resultant slowdown in the pace of tightening.
In consideration of this, these are four investment trends we can expect to see in 2023:
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1. Digitisation and Web3 will go further
As the market stabilises, Web3 and everything it entails — NFTs, cryptocurrencies, blockchain, decentralisation — will rationalise and rebuild momentum.
As people have embraced digitisation due to COVID-19, the world has embarked on the digitisation road of no return. Despite the highly publicised rise and fall of speculative crypto assets that often dominate discussions of Web3, startups that help facilitate digitisation and solutions, especially in areas of concern such as the supply chain, will continue to flourish.
Web3 will bring on more decentralisation, with data stored on a blockchain that only those with permission can edit. This means that users will own their individual data, as opposed to having data stored on a platform, which will in turn further revolutionise wealth-tech. Decentralisation will open up investment even more, all while being tamper-proof, low cost and with faster transaction speeds than traditional centralised systems.
In 2023, wealth-tech in the Web3 era will see the growing momentum of digital investment communities. The tokenisation and digitisation of securities and securities registries will make investor management and engagement seamless and highly transparent.
The availability of liquidity removes one of the major barriers to investing in private companies and will likely turbo-charge the level of participation in the early-stage capital markets, growing the volume of available capital to fuel entrepreneurial ecosystems.
Lastly, with more awareness of climate change, Web3 will also become more and more “greenified”. More effort will be made to reduce/offset the energy use and carbon footprint of computing intense transactions such as blockchain.
2. Renewable energy
According to the International Energy Agency, renewable power is on track to set another global record in 2022, regardless of obstacles including supply chain bottlenecks and higher costs. One example of this is increased competition in the electric vehicles sector.
Experiencing the effects of climate change, such as the intense weather patterns seen throughout much of the world, is also incentivising consumers to pick up on renewable energy. As a result, startups that seek to find clean-tech solutions will thrive.
3. High-yield fixed income
High-yield fixed-income investments like bonds are picking up as it becomes clear that they provide insurance from inflation. Like living on the tenth floor during a flood, investing in high-yield fixed-income investments offers a safer distance from more loss than gain. The higher the yield, the safer it is from the risk of inflation.
Interest rates declining, slow growth, lower inflation and new monetary policies will also be an incentive for bonds, along with defensive stock and emerging markets.
4. Alternative investments becoming more popular
Alternative investments are also forecasted to be on the rise as they could blunt inflation with their low correlation to traditional assets, especially as they become more available to everyday investors.
Gen Z investors, in particular (the demographic whose oldest members are now reaching their mid-20s), are much more open to alternatives such as artwork, wine and even farmland. While these more exotic assets are typically higher risk, young investors have ample time to gamble on them. They are also enticed by the idea of “getting in early”, having seen the huge gains made by early crypto investors.
For example, a recent survey by Lansons found that while less than 10% of Americans overall have invested in alternative assets, 30% of gen Z and 25% of millennials either invest in alternative assets or have knowledge of platforms that allow them to: “Given that alts, including wine, gold, and real estate, are generally regarded as strong hedges against inflation, the current market climate presents a meaningful moment in time for marketers to highlight the benefits of alts as part of a diversified investment portfolio.”
As gen Z and millennials are also set to become the beneficiaries of the largest intergeneration wealth transfer in history, this will see trillions of investment dollars redirected into new, sustainable industries and projects. As a result, more purpose-driven, sustainably-minded companies will find favour as it is with the outlook of these generations compared to older demographics.
Ultimately 2023 will create an environment that drives investors to look for more innovative opportunities following a turbulent 2022 that saw resources, talent and finances affected in unprecedented ways. The key will be to maintain a laser-focus on your set goal as you move from saving to investing, and to concentrate on understanding the market, diversifying your portfolio, and looking at the bigger picture for the entire timeframe of your investment.
Steve Maarbani is the CEO of VentureCrowd.