In this article, we will take a look at the 5 big investment trends in 2023. To see more investment themes popular this year, click 12 Big Investment Trends in 2023.
5. Options
Options trading saw a record growth in popularity among retail investors this year. Options allow an investor with more flexibility and give them a cushion against uncertainties. A Bloomberg report quoted Gareth Ryan managing director of IUR Capital, an equity, derivatives and advisory firm based in London, who said:
“We’ve seen speculative money move out of crypto and into options, given all the risk around the former. Options are not seen as being outright speculative anymore.”
4. Low Carbon Investments
While investments in green technologies and low-carbon solutions are not peculiar to 2023, this year saw pronounced interest from investors in renewable energy resources and low-carbon startups. A latest Bloomberg report says that the third quarter of 2023 was the best quarter for climate technology companies in two years as they received a whopping $16.6 billion in investments. These companies include decarbonization and low-carbon startups.
3. ETFs
Persistent rate hikes, inflation, uncertainty in the stock market and an overall propensity of investors to hedge against risks gave a huge boost to ETFs in 2023. According to data from Morningstar, new exchange-traded funds (ETFs) in the U.S. marketplace are on track to hit record highs this year.
A whopping 391 new ETFs started trading in 2023 through October 27, a massive jump from 311 new ETFs in the same period in 2021.
A Reuters report quoted John Hooson, managing director for ETF Product at BBH, who said that ETFs are rising in popularity as investors tend to tackle volatility and effects of rising rates. Money managers are creating new, innovative ETFs to attractive investors. For example, amid the AI wave, 2023 saw a flurry of AI-focused ETFs.
2. Cash
When inflation and rising interest rates caused stocks to lose their allure in 2022, many analysts and investment gurus were predicting that cash would be the kind in the months and years to come. Earlier this year, two-thirds of the respondents in an MLIV Pulse survey involving 404 professional and retail investors said that cash in their portfolios would improve their portfolio performance. Cash’s allure is tempting for even the Oracle of Omaha, Warren Buffett, who is famously against cash hoarding and always wants to put his money to work. Latest data shows that Berkshire Hathaway Inc.’s cash pile reached a whopping $157.2 billion in 2023 amid lack of attractive deals, interest rate hikes and an overall uncertain economic environment.
Amid rising risk and lackluster performance of stocks, money managers were recommending their clients to give importance to cash. A Bloomberg report quoted Leo Kelly, chief executive officer at Verdence Capital Advisors, who said:
“We’re encouraging people that it’s okay to hold cash, that it’s not just a lead weight on your ankle weighing you down. You can get a nice yield and there will be a lot of volatility in the markets and lots of chances to put that cash to work at attractive levels.”
1. AI
No surprises here. Artificial Intelligence was the biggest and most popular investment trend in 2023 and analysts expect AI and its different sub-segments to dominate the investment horizon for several months and years to come. Funding raised by AI-focused companies reached a whopping $17.9 billion in the third quarter of 2023, data from PitchBook shows, Bloomberg reported. This figure has surpassed all other sectors and segments. The Bloomberg report also said that the value of funding for AI companies jumped 27% in the third quarter when compared to the previous year. Research from Goldman Sachs said that investments in different areas of AI could reach $200 billion by 2025. Researchers at Goldman also said that generative AI and its branches could increase productivity by 1% ever year through the next decades.
In light of this trend major companies like Microsoft, Apple and Alphabet are pouring billions into the AI domain. Companies are launching AI-focused venture funds and are integrating generative AI features into their products.
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