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In business, change is the only constant. Successful companies are those who adapt to these changes, whether they be economic, technological, or social.
When it comes to investing, the key lies in predicting these changes before they happen, to ride the wave of change instead of becoming submerged in it.
In this article, we will explore some of the top trends that will shape the business world in 2023 and beyond, and what every top business investor should consider over the next 12 months.
Alternative investments are in
As the dust starts to settle following the disruption of the festive period, a need for alternative investments will become apparent, whether as a business or individual investor.
Put simply, these are alternatives to stocks and bonds, such as commodities and managed futures including low-cost ETFs and mutual funds.
Together, experts believe high investment in alternatives could soften the effect of inflation across the stock market. For investors, they may provide steadier returns as a potential recession increases market volatility.
One thing to take into account is the higher cost of acquiring alternatives as demand for them grows. However, their excellent performance and high returns would make this worthwhile.
The best business investment portfolios will surely have an array of alternative investments as investors look to weather the storm of another tough fiscal year.
Junk bonds are down
When Warren Buffett described much of Wall Street investment as the antithesis of responsible gambling, he was talking about things like junk bonds.
Junk bonds are high-risk debt investments that have a lower credit rating than most other bonds. They come with high-interest rates to attract investors, but the likelihood of default is much higher.
According to the Financial Times, junk bond issuance has slowed down as we enter 2023, after the US Federal Reserve’s interest rate rises sparked rating downgrades and defaults.
This looks likely to continue for the months ahead, with further rate rises on the horizon. Junk bonds have performed well during the ongoing economic crisis, but the threat of a recession on the horizon is making investors wary.
Expect the current junk market, valued at $1.4 trillion by the Financial Times, to shrink significantly thanks to credit downgrades.
US inflation struggles continue
Inflation was the big economic story of 2022 as it swept across every aspect of our lives, from the cost-of-living crisis to the value of savings.
The big hope is that it will drop during this year, with the US Fed setting a target rate of 2%. This may be wishful thinking, though, even with the Fed’s six rate increases of last year working their way into the global economy.
What’s more, the Fed may be forced to lower interest rates back down to 3% by the end of the year in a bid to ease monetary policy. Such a move will fly in the face of inflation recovery and set prices rising again.
Should this worst-case scenario happen, then investment experts lean toward snapping up I Bonds and Treasury Inflation Protected Securities (TIPS), two types of finance that are popular inflation-friendly options.
Probable crypto bankruptcies
Those thinking that it couldn’t get much worse for crypto had better look away now.
The 2022 crash was accelerated by several stablecoins slipping their pegs and wiping out hundreds of billions from the crypto market value. This led to the infamous implosion of FTX, as well as big layoffs at key exchanges like Coinbase.
It leaves many of these enterprises hanging in the balance as we begin 2023, with the likes of Binance having to provide a $69 billion proof of funds in case disaster strikes. Other crypto firms are busy trying to tempt investors with talk of cash reserves ahead of the trendy celeb endorsements of yesteryear.
Crypto regulation looks set to advance further, too, with the launch of the Fed’s three-month central bank digital currency (CBDC) proof-of-concept project, which could pave the way for official legislation.
It all paints a worrying picture for exchanges who consider the decentralized nature of crypto to being fundamental to its existence.
Hybrid robo-advisors are on the rise
The hectic pace of tech development is set to leave a real mark on investments in 2023 with a rise in the use of robo-advisors.
2022 actually saw a move back toward traditional consultants, but improving robot technology means that some of the new hybrid advisors will combine algorithm-based decisions with access to human expertise.
This low-cost method could prove extremely popular for businesses and individuals looking to save cash in tough economic times, and hybrid advisors have many strings to their bow. They can offer tax-loss harvesting and automatic rebalancing, two things that traditional experts charge a lot for.
Investors seeking the best of both worlds and value for money could make these robo experts the next big thing during the next financial year.