Five investment trends to track for the second half of 2023

Bonds, artificial intelligence, Chinese stocks, oil and the yen provide investors with opportunities for gains

Investors should conduct thorough research and analysis before making any investment decisions. Getty

We’re halfway through 2023, so it is an appropriate time to take another look at investment trends for the remainder of the year.

A lot has changed since the beginning of the year, while some macro events and trends remain stable.

Here are the top five investment trends to watch for the rest of 2023.

Bond market looks brighter

Bonds have emerged as a prime choice for investors among all the lower-risk investment options.

Recent interest rate increases by central banks around the globe have driven a return of appetite for fixed income, with demand for yield and interest picking up significantly in 2023.

The return opportunities from US, UK and European government bonds are at their highest in more than a decade, with a similar story in the investment-grade corporate bond space, with yields also at decade-plus highs.

Our view is there is no immediate end in sight for rising interest rates, although we expect the first central bank to end the rate rises to be the US Federal Reserve, while the European Central Bank will need to raise them a few additional times to bring the real ECB deposit rate further up. The Bank of England might need to raise rates into the new year, diverging further from its peers in doing so.

In such an environment, government bonds, asset-backed securities, high-yield bonds and emerging market debt remain interesting investment options. So, consider investing in bonds for the remainder of 2023.

Artificial intelligence is revolutionising tech

ChatGPT became the fastest app to grow a million users, while Nvidia has already reached the prestigious trillion-dollar valuation mark.

The common element between these two companies is that they are involved in artificial intelligence. Touted as the next frontier of technology, investments in AI are set to grow.

The International Data Corporation predicts global revenue for the AI market to reach $900 billion by 2026, so there is a good opportunity for return on investment.

If you’re a retail investor, consider investing in tech-related exchange-traded funds to get into the world of AI stocks.

Big Tech stocks such as Apple, Microsoft, Google and Meta that continue to invest in AI also remain a good option. They have an edge over newly established AI companies because of their stronger balance sheets.

But while AI is a domain of opportunity, investors should exercise caution. The latest innovation in AI, known as generative AI, could trigger “shiny object syndrome” among investors.

Chinese stocks are picking up, but investors remain cautious

After years of strict lockdowns, China is opening up and so is its economy. The nation’s gross domestic product increased by 4.5 per cent in the first quarter.

But investors have taken a cautious approach. There are two main reasons for it. First is that the recovery has not been as robust as previously expected. And secondly, there’s a cloud over sustainability and fundamental instability in the economy.

So, although Chinese stocks remain a good investment option, investors should stay cautious.

But if you’re interested in foreign investments, consider investing in the Middle East and North Africa region, which is expected to grow at 3.5 per cent, while the global figures stand at 1.9 per cent, according to the World Bank.

Opportunities remain in oil

The oil market remains unpredictable, at least in the long run. In 2022, there were some violent swings due to major factors such as Covid-related shutdowns and the Russia-Ukraine war.

In the first half of 2022, the price of oil was fairly stable, while the second half proved to be more tumultuous.

Oil prices may stay consistently above $70 through the rest of 2023. This depends primarily on Opec-led production controls, how the Fed reacts to inflationary pressures and the corresponding interest rates. If that remains predictable and as planned, opportunities remain in oil trading.

Besides oil, clean energy offers another lucrative opportunity to investors. Investments in this sector are accelerating faster than fossil fuels and are expected to continue to do so.

Besides oil, clean energy offers another lucrative opportunity to investors

Damian Hitchen,
chief executive, Saxo Bank Mena

Bullish for yen, bearish for pound

For FX investors, the Japanese yen and the British pound are two major currencies paired with the dollar. After a bearish 2022, the outlook for the yen looks bullish. The Bank of Japan has undertaken many stances that support the currency’s position.

The pound, on the other hand, continues to be under pressure. The other European currency, the euro, is expected to rebound in 2023 due to lower gas prices and better growth momentum.

While these trends provide valuable insights, investors should conduct thorough research and analysis before making any investment decisions to navigate the ever-changing landscape of the global economy.

Damian Hitchen is the chief executive of Saxo Bank Mena