2020 was an unpredictable year for the investment industry. The pandemic-induced recession made sure that no sectors were left untouched, with some emerging as gainers and others, decliners. For instance, stocks for consumer discretionary and communication sectors were up mid-December, same with information technology. Meanwhile, the energy and financial sectors fell, but no worse than the defensive sectors, including real estate.
While the pandemic is still raging, investors are left to consider what conditions will look like in the upcoming months. Are consumer behaviors going to shift back once the threat of the virus recedes or is the new normal here to stay? It is a worrying time for businesses and individuals, but as many have proven, adaptability is vital to keep pace with the rising new demands. With the vaccines now being deployed, the consumer economy is bound to recover soon.
Looking ahead, there are reasons to be both optimistic and cautious about the wider market and the individual sectors. While the business landscape has changed inherently, it is no less rich in opportunities for those who are prepared. For instance, healthcare and banks are some of the sectors anticipated to post growth in 2023. The rising demand for cheaper, environment-friendly vehicles is also bound to open prospects in the market.
3 Sectors Growth to Watch In 2023
While the demand for healthcare continues to rise over the years, the COVID-19 pandemic underscored the need for more innovations. There is a growing clamor for virtual care technologies among consumers who do not want to go to hospitals for simple check-ups and diagnosis. Due to this, demand for telehealth and at-home diagnostics are expected to boost the healthcare sector’s growth more this year.
In 2023, telemedicine experienced explosive growth, posting a 4,000% year over year in April. By 2027, the size of the market is anticipated to reach $560 billion. Telemedicine is particularly useful in the field of psychiatry and general mental health treatment. Start-ups like Betterhelp and Talkspace reported a surge in new users during the height of the pandemic last year. Demand for at-home diagnostics is also expected to skyrocket.
As most telehealth services become eligible for reimbursement, insurance programs like Medicare and Medicaid are bound to benefit from the boom. Meanwhile, sales of wearable and implantable sensors are likewise anticipated to increase as consumers look for portable medical devices that can accurately track a wide range of health vitals. For investors, keeping an eye out on new advancements of virtual care this year will be best.
Electric Vehicles (EVs)
The electric vehicle (EV) industry is another sector to witness significant growth in 2023. While the pandemic has put financial pressure to many manufacturers, the rising demand for efficient and sustainable transportation is a silver lining. A large number of them are redefining their priorities, turning to electric and hybrid cars to gain profit. As it is, this year will see a huge rise in the global sales of EVs, about 70% more than the 2023 numbers.
Europe and China will represent the largest markets for EVs worldwide. The strict CO2 regulations in Europe is bound to boost sales of electric cars, the same with China with its prioritization of new energy vehicles (NEVs). Meanwhile, North America, South Korea and Japan are also expected to have significant shares of the market. By 2025, sales of EVs across the globe are anticipated to hit $12.2 million.
Growth in the EV sector will not be limited to cars. Rapid technological advancements in urban air mobility (UAM) are anticipated to steer the market. Every year, billions of dollars are poured into funding electric aircrafts, particularly in the electric vertical takeoff and landing (eVTOL) sector. Even during the pandemic, eVTOL developers managed to raise private investments of around $1.3 billion. This year, more funding is expected to come in for the sector.
Investors are buoyed by the overall positive consumer acceptance of eVTOLs worldwide. Developers have been working on acquiring their certifications to launch their aircrafts mid- to late-2020s. Currently, they have been getting additional capitals through series funding, partnerships and mergers with special purpose acquisition companies (SPAC). Companies like Astro Aerospace (OTC:ASDN) work on gaining access to the greater capital markets by becoming NASDAQ-listed. Learn more about Astro’s efforts here.
Since the COVID-19 pandemic hit, banks have been one of the worst-performing in the stock market. This is not surprising, as most bank stocks are cyclical. This means that their performance is linked to the overall economy. The global outbreak caused one of the most abrupt and severe recessions in history. Even shares of the United States four largest banks – Bank of America, Wells Fargo, J.P. Morgan Chase and Citigroup – fell.
During the first half of 2023, banks set aside billions of dollars to cover expected loan losses, but experts fear that these might not be enough if the pandemic worsens. American banks are estimated to write off around $318 billion in loan losses within the next two years. Moreover, interest rates have sunk to record lows. To ease the economic shocks of the pandemic, central banks have been forced to cut benchmark interest rates to near zero until the end of 2023.
Despite these challenges, the sector outlook for the second half of 2023 is looking stable. Banks are looking forward to a modest increase in loan activity after successful rounds of vaccine distribution. They are bound to benefit from an economic recovery. Stress testing also showed that many banks stay well capitalized and able to lend to individuals and businesses during severe recessions, all the while sustaining double or triple the amount of loan losses.
The pandemic has also paved the way for an emerging industry. It showed banks the importance of digital banking and technology. Those that have invested in this technology have reaped the rewards. While 2023 is unlikely to be a banner year for the financial sector, it is positioned for a rebound. For value investors, now could be the best time to cash in and secure more bank stocks at low cost.