Seasoned investors often have a long-term view of the stock market, using short- and medium-term volatility to buy into the themes they believe will pan out over many years. While identifying these trends is difficult, tuning out the noise can reveal what’s to come, possibly resulting in significant gains.
With the calendar flipping to 2022, we highlight five of the most popular trends right now that show significant potential for growth.
Outside of trading cryptocurrencies, retail investors can participate in the expansion of blockchain, the technology that powers digital coins like Bitcoin and Ethereum.
Blockchain is essentially a string of information or “blocks” recorded on independent computers and shared across a distributed network. Each block of data is frozen in time on an open ledger for all participants to access. This feature makes blockchain technology especially useful in industries where security is paramount, such as banking.
By linking data and making it accessible to everyone, blockchain eliminates the risk of foul play by a single party. It also simplifies and automates processes that might have previously been inefficient.
For example, Walmart (WMT) and Sam’s Club use blockchain to fight food illnesses like E. coli. By requiring their vendors to upload sourcing and logistics data in real-time, they can then improve traceability, ensuring food safety in case of an outbreak at one of their suppliers.
Other notable corporations employing blockchain technology are Microsoft (MSFT), General Electric (GE), PayPal (PYPL), Starbucks (SBUX), Salesforce (CRM) and IBM (IBM).
2. Space investing
Over the past decade, technological advancements and manufacturing innovations have placed the space industry within humanity’s reach. Since American astronaut Neil Armstrong first set foot on the moon in 1969, space-launch costs for satellites, rockets, and other space artifacts, have become more affordable. Plus, with a combination of private and public funding and increased competition, the cost of accessing space has continued to decrease.
In fact, Morgan Stanley estimates the potential revenue from the global space industry could surpass $1 trillion by 2040 from $350 billion today, an increase of 186 percent. In addition, possible breakthroughs in aerospace and defense, satellite-broadband internet, telecom, and high-speed cargo delivery may propel the industry to new highs.
The changing economics in the space industry also means that greater accessibility and affordability may spark a new era of innovation, opening the door for investors to get behind the companies that could benefit from this trend.
One way to tap into space investing is through exchange-traded funds such as the Procure Space ETF (UFO) or the SPDR S&P Kensho Final Frontiers ETF (ROKT). Alternatively, public companies like Boeing (BA), Honeywell (HON), Lockheed Martin (LMT), Northrop Grumman (NOC), and many others are among the leaders in the aerospace industry.
3. Artificial intelligence
The technological revolution has brought artificial intelligence (AI) to the forefront of society, making a reality of what was previously only imagined. With AI disrupting every aspect of our lives, the new technology could become the most influential industry of the century.
At its core, AI attempts to replicate human intelligence in a computer or machine with faster speed and greater accuracy. So as these systems become more intelligent, AI becomes more powerful, with its uses and applications impacting nearly every industry.
Analysts at International Data Corporation (IDC), a provider of market intelligence, predict that by 2024, worldwide revenues for the AI market could top $500 billion, logging a five-year annual compound growth rate of 17.5 percent.
AI is everywhere. Whether it’s Apple (AAPL) using facial recognition software to unlock iPhones, companies like Samsung building smart appliances such as refrigerators and washing machines, or robo-advisors leveraging automated algorithms to optimize investments, the technology is here to stay.
For most retail investors, there’s a chance you already have exposure to AI, as many large U.S. public companies are either already using it or are actively looking to invest in the technology. But for those seeking more direct exposure, some notable names include Intuitive Surgical (ISRG), Upstart Holdings (UPST), Intel (INTC), Trimble (TRMB) and Brooks Automation (BRKS).
4. Electric vehicles
The electric vehicle (EV) industry is in a massive transformation that could bring trillions to the global economy. To date, nearly all major automakers have announced plans to increase EV availability, with some like Jaguar and Volvo planning to completely phase out gas-powered vehicles within the next decade.
By 2030, the International Energy Agency (IEA) predicts that 145 million EV vehicles could be on the road, up from just 10 million today, marking an increase of more than 1,300 percent.
To gear up for the increased demand, most of the largest carmakers have vowed to hit electrification targets in the upcoming years, reconfiguring their production lines to build more EVs.
For example, Ford (F) says it plans to invest $30 billion in electrification efforts by 2025, pledging that by mid-2026, 100 percent of its passenger vehicles in Europe will be zero-emissions capable, moving to all-electric by 2030. By then, the company anticipates that 40 percent of its global sales will be fully electric vehicles.
Electric-vehicle makers like Tesla (TSLA) and NIO (NIO), semiconductor producers like NVIDIA (NVDA) and Intel (INTC), and cloud providers such as Microsoft (MSFT) and Amazon (AMZN), will be essential for ensuring vehicle safety, connectivity and efficiency.
5. ESG investing
The disruption and uncertainty caused by the global pandemic ignited a renewed interest from investors, consumers and employees to favor those corporations that prioritize environmental, social and governance (ESG) causes. Beyond profits, these organizations have adopted a long-term view on how they run their business.
And those choices are paying off. According to Morningstar, global demand for sustainable investments hit a record in 2021, topping nearly $2 trillion.
Apart from creating value through sustainable practices, shares of these corporations tend to be more resilient than their peers.
For example, research from Bank of America shows that shares of corporations with solid ESG practices tend to be less volatile, have higher three-year returns, and are less likely to declare bankruptcy.
One way to invest in socially conscious companies is through exchange-traded funds like the iShares MSCI USA ESG Select ETF (SUSA), which tracks an index of highly rated ESG companies. Some of these names include American Express (AXP), Accenture (ACN), Disney (DIS), Home Depot (HD) and Hasbro (HAS).
Purpose-led organizations are helping to set the pace for a better future. By focusing their efforts on reducing carbon emissions, minimizing waste, advancing social issues, fostering equality, equity and inclusion, and so forth, these corporations are redefining the role of business in society.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.