2022 wasn’t a great year for the markets. The bears have been slashing away amidst the jumble of growing uncertainty, global inflation, rising geopolitical tensions and dwindling business performance.
Perhaps the next year will present once-in-a-lifetime investment opportunities; market downturns are typically followed by prosperity, and recoveries have historically been faster with each looming recession. The slingshot has been stretched throughout the entirety of this calamitous year, and it may finally release in 2023.
Here are 10 investment tips and ideas to consider when stepping into the new year.
Winter is coming. Oh wait, it’s here already.
Amid rising tensions between Russia and the European forefront, the price of energy commodities including crude oil and natural gas may continue to clamber higher, and that will especially be the case if energy supplies continue to be constrained.
Global energy shortages have helped the energy sector post record gains, and Europe is set to face an energy shock, and that creates high demand for a certain commodity by the name of natural gas.
Consider investing in energy commodities as they may generate significant returns while the imbalance between energy demand and supply persists, but watch out for high volatility.
The world is craving chips
Semi-conductor chips are more or less the most highly-demanded piece of technology of the modern era. Used in electric vehicles, smartphones and modern appliances as they guarantee more efficient and rapid operations, chips have been in shortage for several years, initially caused by the COVID-19 epidemic and the manufacturing halts it brought with it.
Giants Intel, AMD and Taiwan-based TSMC are among the behemoths which supply much of the world’s digital gold that is the ever-so-admired semiconductor chip.
Heavily hindered in 2022, business of subdued chipmakers has dwindled, but demand remains sky-high and analysts predict the industry’s value could reach $1 trillion by 2030.
Consumers are craving chips, so grab a few yourself if you’re hungry for captivating profits!
3. Value vs Growth stocks. Does it even matter?
In the scope of stocks, growth stocks may be a very lucrative opportunity for profits. They are those which witness rapid price appreciation, but are subject to wider price fluctuations.
Value stocks on the other hand are those which typically remain steady throughout market downturns & upturns, but it wasn’t as simple as that in 2022.
Most stocks have been battered as investors & traders have grown weary to pour their funds into stocks and other assets in this vicious year, characterized by growing pessimism and short-lived bullish runs.
2023 may be the year for the stock market, so get to know your stocks by researching the ins & outs, study the charts and brace for impact.
The Paris Agreement deadline nears, and the world is running behind
As the deadline for The Paris Agreement which obligates almost 200 countries to collectively aim to lower global warming looms, the world seems to be falling behind according to the 2020 score sheet. Thus, nations have put catching up with the agreement into overdrive.
This sudden rush to catch up with the progress expectations have led to the rise of what could be the new market giant; the energy transition and sustainability sector, more commonly known as “Green Stocks”.
The industry includes players such as innovative energy technology companies, renewable energy providers and the trendier electric vehicle makers that birthed new market juggernauts like Tesla & Nio, who were additionally aided by rising oil and gas prices worldwide.
Green stocks could be the major winner of 2023, but this will heavily depend on consumer sentiment towards green energy. As long as it’s high, so should be your profits.
“Be fearful when others are greedy. Be greedy when others are fearful.”
A cheesy rule of thumb by Warren Buffett, but is truer than not. In a world where fear-driven investors are worried and stocks are being dumped, other investors position themselves uniquely to pick up those same shares for a substantially undervalued price.
Of course, this opportunity does not present itself all the time, but a company that has seen a recent plunge in its stock despite showing resilience in the past and forecasting a bright future will deem it undervalued, and this would be an ideal investment opportunity for such scenario.
6. Consider investing sporadically during the inflation deceleration
The renowned S&P 500 index, regarded as a benchmark for global market growth, has not made fresh 52-week lows since it dropped to $3,491 on October 13th. The Federal Reserve is expected to decelerate their interest rate hiking maneuvers, which will bring some relief and optimism for investors and traders.
With that being said, it may be difficult to find the lowest point in the market as the entry point for purchase/investment, that is if it will drop even lower in the coming months. Hence, a wise thing to do would be to invest sporadically, such as through dollar-cost averaging or other trading strategies which encapsulate the long term, rather than trying to time the market.
Watch Out for Layoffs
If the market recovery doesn’t go as planned, expect more workforce layoffs to occur as businesses will be handed with a plate of chunky costs. Hand-in-hand with reluctant investors and weakening potential for growth, the stock price of these companies will naturally shrink.
Therefore, if you are considering to invest in 2023, understand the risk that the bearish downturn of 2022 may not be over yet, and it could prolong for a little longer. This presents an opportunity in itself to purchase undervalued stock.
Bonds are back in style
With this year’s dizzying rollercoaster of financial events, bonds started to look more appealing to investors as they put their inflation goggles on. As interest rates seem to be looking down, and the yields’ rebellious attitude to prices, this inflationary decline looks like a good omen for bonds.
Just be careful with what bonds you decide to fancy, as the high-yielding U.S. corporate bonds are somewhat left out of the conversation as they don’t possess the same captivating stability as treasuries, investment-grade bonds and municipal bonds.
Gold may shine bright like a diamond
Historically, gold has been considered as a safe haven and a hedge for inflation. Its unique intrinsic characteristics, religious value and universal attractiveness have kept its prices stable and growing for centuries.
In 2022, gold prices plummeted alongside the majority of other assets such as real estate and stocks, which questions the credibility of the beforementioned claim. Nevertheless, gold fanatics may be waiting for the right time, as the price of the yellow metal seems to be heading in an upward direction in the short-run, and it may reinforce its status as the trusty safe haven.
Look both ways before you cross the year!
Last but not least, it would be safer for you to look both ways before you cross the year. Conflicting expectations of analysts, financial gurus and researchers may blur the future outlook. Keep in mind that the bears may not be done slashing, so in other words, address the bear in the room before you go ahead with any investment decision.
Written by ARIFF AZRAEI BIN MOHAMMED KAMAL, Market Research Analyst of GoldenBrokers
Trading is risky and your entire investment may be at risk. TC’s available at https://goldenbrokers.my/