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.
Below we highlight five of the most popular trends right now that show tremendous 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. 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.
From electric-vehicle makers like Tesla (TSLA) and NIO (NIO), semiconductor producers like NVIDIA (NVDA) and Intel (INTC), to cloud providers like Microsoft (MSFT) and Amazon (AMZN), many of these names will be essential for ensuring vehicle safety, intelligence and efficiency in the EV market.
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. Real estate
A recent study by Bankrate revealed that physical real estate is Americans’ preferred long-term investment. And it’s all for a good reason. Investors have historically favored real estate for its diversification characteristics as these investments have low correlations to stocks or bonds.
But for those interested in having exposure to real estate without tying up their capital with a large down payment, there’s an alternative: real estate investment trusts (REITs).
REITs essentially invest in a range of real estate properties such as residential apartments, office buildings, hospitals, data centers, hotels, retail stores and so on. In addition, the companies that support these activities, such as financial lenders and management companies, are also part of the group.
To qualify as a REIT, corporations must distribute a minimum of 90 percent of their taxable income in dividends, making dividend yields essential for investing in these funds. REITs also serve as a diversification tool in investors’ portfolios, as they are less correlated to other asset classes like stocks.
Some examples of popular REITs include American Tower Corporation (AMT), Prologis (PLD), Crown Castle (CCI), Public Storage (PSA) and Simon Property Group (SPG).
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.