Market volatility might make or break an investor, depending on their outlook. A robust investing strategy is important to tide over unforeseen market movements. Kavan Choksi points out that investors should be adequately informed about macro factors and market movements that might cause the market to perform in the opposite direction or show an uptick. Smart investment ideas and planning can help investors feel in control.
Kavan Choksi shares a few investment trends that may become prominent in 2023
Distinctive views and ideas, no matter whether on a particular stock or the long term outlook of an entire sector, can provide fertile ground for investors desiring to generate excess returns. Here are a few investment themes that one may witness in 2023:
- Mega-cap stocks coming back in favor: Till the latter months of 2022, mega-cap technology stocks were widely favored in the market. The market capitalizations of such stocks are basically multiples more than the $10 billion classification of a large-cap stock. Mega cap stocks were largely influenced by the popularity of indexing that bases weights on market cap. Changes in macroeconomic conditions, like higher interest rates and inflations, prompted investors to change course. There, however, is a chance that mega-cap internet stocks can emerge stronger in the future, based on the incremental return on investment of machine learning and artificial intelligence.
- Private markets primed for long-term growth: Private markets like real estate, venture capital and private equity have benefited from strong relative performance and an influx of capital for years. Hence, it is justified that investors might be confused about what a challenging macroeconomic environment may imply for private markets. This category is expected to experience a relatively moderate near-term growth in 2023 as per analysts. However, the 10 trillion private markets industry can actually grow at 12% compounded annually to $17 trillion in assets over the coming five years, based on new growth engines, rising allocations, and the track record of the market.
- Carbon capture might have a breakout year: Carbon capture is a process that involves preventing or removing carbon dioxide from the atmosphere, and is likely to play a critical role in achieving long term climate goals. While carbon capture might take 5-10 years to scale, strategists and analysts believe that 2023 can be a breakout year for carbon capture and storage. Major energy companies that are already benefitting from high oil and gas prices now would have a more viable way to de-carbonize their operations profitably.
- Higher rates can be a game changer for European banks: As the region seems to head for a recession, the decade long wariness of the investors around European banks still continues. However, higher rates can prove to be a game changer for the sector, and healthy liquidity levels are likely to translate into slow deposit re-pricing.
Kavan Choksi also underlines that while investors view the Asian markets with skepticism as they worry that central banks will hike rates and restrain growth, many strategists believe that a combination of healthy balance sheets and simpler financial conditions can actually support domestic demand strength in Asia in 2023.