Three 2023 Investment Sectors

Now that 2022 is over, investors are hoping that the markets will at least get a little better in 2023, if not completely turn around from last year, which was one of the worst on record. But since central banks plan to keep raising interest rates for at least a few more months, the outlook for stock markets is still uncertain at this point.

According to J.P. Morgan Global Research, the world economy will only grow by a slow 1.6% this year. This is because financial conditions will tighten, the winter will make China's COVID policy worse, and Europe's natural gas problems will not go away. "The global economy is not at immediate risk of falling into a recession because the sharp drop in inflation is helping growth," the US bank said in its report, "2023 Market Outlook: Stocks Will Fall in the Short Term as Economic Growth Slows." " The S&P 500 is likely to retest the lows of 2022 in the first half of 2023. However, a change in direction from the Fed could lead to an asset recovery later in the year, which could push the S&P 500 to 4,200 by the end of the year.

As a result, not all sectors will do well this year due to the tough environment. And because of this, it becomes even more important to figure out which industries are likely to stay strong in the face of such challenges.

Staples for consumers

Several predictions say that the eurozone, the UK, and maybe even the US will go into recession this year. One of the safest investments for investors is in consumer staples, which are things that consumers need all the time, like food and drinks, household goods, and hygiene products.

The sector is one of the safest places to invest because people will always need staples, no matter what the economy is doing. In fact, because consumer staples are so stable, the sector did better than the rest of the market last year. The S&P 500 Consumer Staples (sector) lost only 3.5%, while the broader benchmark index lost 18%.

And this resilience will be important for investors in 2023, since Fidelity Investments thinks that some companies that make everyday items will do well this year. " Many of the trends that started in 2022 are likely to continue in 2023. But Ben Shuleva, the sector portfolio manager at Fidelity, says that consumers may be more sensitive to future price increases than they were to previous price increases. This is especially true if the economy gets worse and the unemployment rate goes up. "Companies that can raise prices even more without losing sales may be in the best position to deal with this situation."

Shuvela also said that consumer staples companies with ties to emerging markets should be looked at. This is because emerging markets tend to have a middle class that grows more quickly than developed markets, and their long histories of fighting inflation mean that consumers are more used to seeing price increases and are therefore less likely to change their buying habits.

Precious metals

As the global economy is expected to get worse in 2023, especially in the first quarter, investors will have to do everything they can to protect their portfolios. This means that investments that are safe could be popular in the coming year.

Some people may think that the US dollar is the best safe haven, but the fact that the U.S. Federal Reserve (the Fed) has recently slowed the rate of rate hikes suggests that the greenback's strength may have peaked last year and that it is unlikely to rise further. And since most stock and bond markets are expected to struggle for at least part of this year, the case for gold, silver, and other precious metals has become even stronger.

Precious metals will be especially attractive this year, given the current market conditions, because they have a long history of being good ways to store value and protect against inflation. And with recent interest rate hikes sending the dollar to multi-decade highs in 2022 and destroying demand for a lot of commodities, including gold, investors still have a good chance to increase their holdings before prices go up again.

In the second half of the year, if the Federal Reserve stops tightening the money supply, the demand for gold could go up even more. "Central banks as a group have continued to add more and more gold to their reserves since the Great Financial Crisis," Eric Strand, manager of the AuAg ESG Gold Mining UCITS ETF, told CNBC in December. He also said that 2023 could be the year that gold reaches a new all-time high above $2,100 and the beginning of a "new secular" bull market. "We think that central banks will change their minds about raising rates and become more dovish in 2023." This will set off a huge move for gold that will last for years. We think gold will be at least 20% higher by the end of 2023, and we think miners will do twice as well as gold.

Healthcare

Many people around the world are relieved that the perceived coronavirus threat and the number of COVID deaths are going down. However, the effects of the pandemic will be felt for years, if not decades, to come. Few industries have changed as much as healthcare, and this change is still going on. The effects of the virus have sped up the need for better and more creative healthcare solutions.

The defensive healthcare sector also does better when the economy is bad, just like consumer staples. Again, this makes sense, since a drop in average income usually means a drop in quality of life and general health, which makes people need health care solutions more often or more seriously. Even though the S&P 500 lost about 18% in 2022, the iShares U.S. Healthcare ETF only lost about 4.4%, which shows how resilient the sector is when market conditions get worse.

Citibank analysts wrote in December, when they gave the healthcare sector an "Overweight" rating, that they were tempted to downgrade because of the sector's relative outperformance over the past year. However, they decided to stick with the sector's defensive connotation. The bank has a lot of faith in the pharmaceutical industry.

Also, it's important to remember that even though the coronavirus seems to be less of a threat these days, the appearance of another deadly COVID variant is still a big deal. In fact, there may be more mutations than just the Omicron variant. Jeffrey Barrett, who used to run the COVID-19 genomic surveillance programme at the Wellcome Sanger Institute, told The Times in September that it's possible that we won't always be stuck on a "new variant treadmill." But he also said he would "never say never" about anything.

Professor Anthony Brookes, an expert in genomics and bioinformatics at the University of Leicester, said, "At some point, we will have defences against all versions of COVID." At that point, the virus will become endemic, affecting only those with underdeveloped or poor immune systems, like the very young, the very old, or those who are immunocompromised. "This is true for COVID just as it is for all viruses, even though COVID vaccines have helped cut down on deaths." But we don't know when this will happen, and we don't know if Omicron is one of its last choices. "