2023's Top Investment Trends

Cryptocurrencies also struggled, with the two main ones (Bitcoin and Ethereum) losing over 60% of their value since the beginning of the year. In such a complex and constantly evolving landscape, making wise investment choices can make a significant impact.

As we look ahead to the rest of 2023, what investment opportunities should we be considering? How will the stock market perform, and what can we expect? Let's examine the major investment trends for 2023.

In 2022, inflation affected every aspect of the economy, from gasoline to groceries. The big question for 2023 is whether inflation will drop to the FED's 2% target. Many experts believe it is unlikely, given that the effects of the FED's interest rate hikes in 2022 will take time to be felt across the economy.

Morningstar predicts that the FED will ease its monetary policy and lower interest rates to around 3% by the end of 2023, but that may not be the cure for inflation. So, what should we do to protect our investments from the inflationary storm? One solution could be Treasury Inflation Protected Securities (TIPS), which remain a top pick for short-term investments. Another option to consider is bonds, which can help balance out the inflationary impact.

Although interest rates may continue to rise, albeit at a slower pace, and companies and analysts may revise their earnings projections downwards in the early part of the year, experts predict a stock market recovery in the second half of 2023 as interest rate increases start to slow. In 2022, the market was bearish, but 2023 has the potential to be a bullish year with a reversal of market trends.

Alternative investments (commodities and Futures) are among the trends and opportunities to seize in 2023. Furthermore, having a well-diversified portfolio can help mitigate the effects of inflation and economic recession and support returns beyond just stock dividends. Although alternative funds come with higher costs and may require more management effort, they often offer higher returns and are worth considering as part of an investment strategy.

Cautious investors, during uncertain times, tend to avoid high-yield investments, instead choosing those that are more stable and less susceptible to market changes. Bonds have always been considered safe and reliable investments, despite having a certain level of risk. If 2022 was a difficult year for those who opted for investing in bonds, it is likely that this year, they may instead become more attractive and advantageous for those seeking diversification and higher returns thanks to the normalisation of inflation.

It is safe to say that 2023 will likely be a better year for cryptocurrencies than 2022 since it would be difficult for it to be any worse. Several cryptocurrencies suffered a major collapse in the middle of last year and this has caused investors to lose hundreds of billions. Perhaps, companies holding these virtual coins should focus on liquidity to convince investors, rather than relying on influencer campaigns.

The ongoing energy crisis has temporarily shifted focus back to traditional fossil fuels to meet demand, but in 2023 and beyond, reducing carbon emissions and embracing renewable energy will once again be at the forefront of geopolitical strategies. In particular, the focus will be on the value of investments in renewable energy sources to ensure energy security and respect climate commitments. To achieve the goals set by 2030, investments are required to regenerate ecosystems through long-term programs. Therefore, sustainable investors should consider this 2023 investment trend and reward companies that use their excess profits to invest into the energy transition.

During 2022, investors turned away from autonomous investment tools such as robo-advisors and brokerage accounts, and especially those with a large liquidity and significant assets, are increasingly turning to traditional financial advisors, such as Wealth Managers or Financial Planners.

However, the hybrid model of robo-advisors, which offers both investments managed by algorithms and access to the advice of flesh-and-blood experts, may even become a popular trend in 2023.