Five investment trends to consider right now
Figuring out what the future holds can result in significant gains
Seasoned investors often approach the markets with a long-term view, 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.
As we move through the second quarter of 2022, here are five of the most popular investment trends right now — looking at several themes that show significant potential for growth.
Inflation protection
Americans are paying more for everyday items as inflation hovers near its highest level since 1981, according to Labor Department data. Investors turned to inflationary hedges like gold to keep up with rising prices.
Gold has historically been a safe-haven asset for investors because its value tends to rise along with inflation. In addition, in times of political unrest or heightened volatility, bullion acts as a portfolio diversifier because of its low correlation to the stock market.
For example, during the financial crisis in 2008, gold prices rose 2 percent while the S&P 500 index plunged 37 percent.
There are multiple ways to gain exposure to gold, from directly purchasing the metal to more indirect methods like owning shares of public mining companies. However, the most efficient approach for most retail investors is likely to invest in gold exchange-traded funds.
Popular gold funds like the SPDR Gold Trust are investments backed in physical gold, and its performance is highly correlated to gold spot prices.
Apart from gold and other precious metals, investors can stay protected against inflation by considering assets like Treasury inflation-protected securities or other savings bonds like I Bonds, which currently have a yield north of 7 percent.
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 causes. These enterprises have agreed to focus on long-term value creation over short-term gains.
And those choices are paying off. According to Morningstar,
global demand for sustainable investments hit a record in 2021, reaching $2.7 trillion.
By creating societal value through sustainable practices, shares of these corporations also 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 threeyear returns, and are less likely to declare bankruptcy.
One way to invest in socially conscious companies is through ETFs like the iShares MSCI USA ESG Select ETF, which tracks an index of highly rated ESG companies. Some of the names on the list include American Express, Accenture, Disney, Home Depot and Hasbro.
Artificial intelligence
The technological revolution has brought artificial intelligence to the forefront of society, making a reality of what was previously only imagined. With AI disrupting many aspects of our lives, the new technology could become the most influential industry of the century.
AI attempts to replicate human intelligence in a computer with faster speed and greater accuracy. So as these systems become more intelligent, AI becomes more powerful.
Analysts at International Data Corp., 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.
The metaverse
The future of the internet includes virtual worlds where humans can interact without the confines of physical space. And according to analysts’ estimates, these virtual environments could be the next big
investment opportunity.
Tech companies are developing ecosystems where people can shop, play, exercise, learn and experience most life activities digitally.
As audiences for these virtual environments grow, so does the interest from corporations trying to capitalize on this trend.
Among investment opportunities, some analysts point to NVIDIA, a semiconductor company that powers computer graphics, as a potential winner from the growth of the metaverse.
Investing in music
The music industry is entering a new golden age with technology disrupting how listeners consume music, from concerts in virtual reality to accessing any song at any time. As listeners tune in, Goldman Sachs estimates that music revenue could reach $131 billion by 2030, supported by a spike in music streaming across the globe.
Broader access to bandwidth and rapid innovation has enabled brands such as Apple, Spotify and YouTube to redefine the music experience.
For musicians, streaming platforms hold a wealth of information on listeners’ habits, guiding emerging artists in deciding tour locations, pitching new songs to producers, gathering audience demographics and raising money for new projects. Spotify hosts more than 380 million listeners in 184 markets. These efforts create additional revenue streams in royalties for music owners.
For those more in tune with the industry, memorabilia and musical instruments become collectors’ items over time, sometimes fetching tens of thousands of dollars (or more).
Some investors believe the music industry could become the next big hit for their portfolios in the years ahead.