- Investment

Top Stock Market Trends to Watch in 2023

After a strong first half, the stock market faces significant risks. But recency bias and a more positive macro backdrop could help stocks rebound in 2023.

One company that could benefit from a more optimistic outlook is Generac, which makes backup generators. Its focus on green energy gives it a competitive advantage over electric utilities that are slow-growing.

1. Technology Stocks

Technology stocks helped fuel the first-quarter stock market rally, as investors grew more optimistic about a Fed pause and encouraging U.S. economic data. However, several potential roadblocks could trip up the tech sector’s momentum.

Apple’s sluggish growth rate, overseas supply chain issues and weak iPhone 14 demand are among the risks facing this iconic company. It may be time for Apple investors to diversify into other areas of the market.

2. Energy Stocks

The energy sector encompasses many different types of companies that work in various phases to bring different forms of energy to market. It covers everything from oil and natural gas to solar and renewable energy companies.

Electric utility company NextEra Energy is a great example of this. The company is a dividend stock, meaning investors collect income regularly. Its fiscal prudence also ensures it doesn’t have to set aside “just-in-case” capital to cover loan losses. This allows for solid profit growth year-over-year.

3. Financials

Investors may find some comfort in Mastercard’s fiscal prudence. The company’s decision to focus on payment processing rather than lending keeps it from having to set aside “just-in-case” capital to cover loan losses.

Growth stocks typically come with higher price tags compared to value stocks, but their high potential for fortune-creating returns can make them well worth the investment. And even though significant market downturns can test long-term investors’ resolve, history has shown that investing during down markets is often a smart move.

4. Health Care

Healthcare is one of the largest and most complex sectors. It accounts for about a quarter of the U.S. economy, so a company’s success in the sector can make or break its share price.

Health care companies that develop new drugs, vaccines or devices are often rewarded by investors. Traders are also attracted to telehealth stocks that help patients connect with medical professionals via video calls or mobile apps.

Biotech, pharma and medical equipment stocks also pay generous dividends. Some are even dividend aristocrats.

5. Consumer Staples

Consumer staples companies make products like food, paper towels and soap that consumers will continue to buy regardless of the economy. These companies often generate solid profits.

This sector has tended to hold up better during recessions and may provide some stability in 2023. This is especially true for those consumer staples companies with emerging-market exposure that can benefit from inflation and higher raw materials costs. Fractional shares, allowing investors to buy slices of a share rather than the entire thing, could help reduce portfolio risk.

6. Consumer Discretionary

Everyone loves to splurge once in a while on a new big-screen TV, an expensive pair of shoes or a weekend getaway. These discretionary items are what make up the consumer discretionary sector.

These stocks tend to do well during economic expansion periods with low interest rates. But their performance can wane when inflation becomes high. This is because higher inflation equates to interest rate hikes. When interest rates rise, consumers tighten their wallets and move to risk-off investments like consumer staples.

7. Industrials

Industrials companies produce capital goods, which are the materials and machines used to make other products. These companies are cyclical and tend to perform well in times of economic growth, but they also suffer during recessions.

Investors can invest in individual industrial goods companies or look for funds and exchange-traded funds that track the sector as a whole. These funds can help you gain exposure to the top stocks in this industry, including those involved with aerospace, industrial machinery and lumber production.

8. Energy Services

Energy services companies (ESCOs) design and implement energy efficiency upgrades with the primary goal of achieving verifiable, measurable and assessable primary energy savings. Services offered may also include energy infrastructure outsourcing, power generation, supply and risk management.

Equipment-affiliated ESCOs offer performance contracts that guarantee a specific amount of energy savings over contract terms ranging from 10 to 20 years. Non-utility ESCOs generally focus on energy-as-a-service projects and are project and product neutral. These firms are also incentivized to lower customer upfront technology costs through project financing and other methods.

About Padraig Simmonds

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