Seasoned investors often approach the markets with a long-term view, using short- to medium-term volatility to invest in themes they believe will develop over many years. While it’s hard to identify these trends, ignoring the noise can reveal what’s to come, which can lead to significant gains.
As we navigate the second quarter of 2022, let’s highlight five of the most popular investing trends right now – looking at several themes that show significant growth potential.
1. Inflation protection. Americans are paying more for everyday items as inflation nears its highest level since 1981, according to Labor Department data. With the cost of living rising rapidly, investors have turned to inflationary hedges like gold to track rising prices.
Gold has always been a safe haven for investors as its value tends to rise with inflation. Additionally, in times of political unrest or increased volatility, bullion acts as a portfolio diversifier due to its low correlation to the stock market.
For example, during the 2008 financial crisis, the price of gold rose 2% while the S&P 500 index plunged 37%.
There are several ways to gain exposure to gold, from buying the metal directly to more indirect methods like owning shares of public mining companies. However, probably the most effective approach for most retail investors is to invest in gold exchange-traded funds (ETFs).
Popular gold funds like the SPDR Gold Trust (GLD) are investments backed by physical gold, and its performance is highly correlated to spot gold prices. Others like the VanEck Vectors Gold Miners ETF (GDX) track a basket of public mining companies. You can also choose to make a similar investment in silver.
Besides gold and other precious metals, investors can stay inflation-protected by considering assets like Treasury Inflation-Protected Securities (TIPS) or other savings bonds like I Bonds. , which currently have a yield north of 7%.
2. ESG investing. The disruption and uncertainty caused by the global pandemic has sparked renewed interest from investors, consumers and employees to favor companies that prioritize environmental, social and governance (ESG) causes. Beyond profits, these companies have agreed to focus on long-term value creation rather than short-term gains.
And these choices seem to pay off. Global demand for sustainable investments hit a record high in 2021, reaching $2.7 trillion, according to Morningstar.
By creating societal value through sustainable practices, the stocks of these companies also tend to be more resilient than their peers.
For example, Bank of America research shows that stocks of companies with strong 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 responsible companies is to use ETFs like the iShares MSCI USA ESG Select (SUSA) ETF, which tracks an index of highly rated ESG companies. Some of the names on the list include American Express (AXP), Accenture (ACN), Disney (DIS), Home Depot (HD) and Hasbro (HAS). Other options include the iShares Global Clean Energy ETF (ICLN) or the SPDR S&P 500 ESG ETF (EFIV).
Purpose-driven organizations hope to set the tone for a better future. By focusing their efforts on reducing carbon emissions, minimizing waste, advancing social issues, and promoting equality, equity, and inclusion, among other worthy causes, these companies are redefining the role of business in society.
3. Artificial Intelligence. The technological revolution has brought artificial intelligence to the forefront of society, bringing to life 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.
At its core, AI attempts to replicate human intelligence in a computer or machine with faster speed and greater accuracy. So, as these systems get smarter, AI becomes more powerful, with its uses and applications impacting nearly every industry.
Analysts from International Data Corp., a market intelligence provider, predict that by 2024, global AI market revenue could surpass $500 billion, recording a compound annual growth rate of 17 .5% over five years.
AI is everywhere. Whether it’s Apple using facial recognition software to unlock iPhones, companies like Samsung building smart devices like refrigerators and washing machines, or robo-advisors using automated algorithms to optimize investments, technology is all around us.
For most retail investors, you may already have exposure to AI, as many large US public companies are already using it or are actively looking to invest in the technology. But for those looking for more direct exposure, some notable names include Intuitive Surgical, Upstart Holdings, Intel, Trimble and Brooks Automation.
4. The Metaverse. The future of the Internet includes virtual worlds where humans can interact without the limitations of physical space. And according to analysts’ estimates, these virtual environments could be the next big investment opportunity.
Through greater computing power, faster Internet connectivity, and other technological advancements, tech companies are developing ecosystems where people can shop, play, exercise, learn, and experience most activities. digital life. Facebook, for example, has rebranded its name to “Meta” and plans to invest billions in its ambition to build the metaverse.
As the audience for these virtual environments grows, so does the interest of companies trying to capitalize on this trend. Sotheby’s Art Gallery, for example, announced last year that sales of non-fungible tokens had reached $100 million and began operating Sotheby’s Metaverse, a new virtual gallery in Decentraland, a 3D virtual world. Similarly, Nike recently announced the expansion of its digital footprint through the acquisition of RTFKT, a virtual sneaker company.
Likewise, Microsoft has launched the acquisition of Activision Blizzard for $68.7 billion in the largest gaming deal in history – and a big bet on expanding the metaverse.
Among other investment opportunities, some analysts are pointing to Nvidia, a semiconductor company that powers computer graphics, as a potential winner in the growth of the metaverse. Additionally, Autodesk and Unity Software, software companies that enable architects and designers to create 3D models, and cloud technology provider Fastly are also prominent names in the field.
For those looking for broader exposure, the Roundhill Ball Metaverse ETF offers an efficient and easy way to invest in specific Metaverse stocks.
5. Invest in music. The music industry is entering a new golden age with technology disrupting the way listeners consume music, from virtual reality concerts to accessing any song at any time. As listeners tune in, Goldman Sachs estimates that music revenues could reach $131 billion by 2030, supported by an increase in music streaming across the world.
The combination of wider 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 about listener habits, guiding emerging artists in choosing tour locations, pitching new songs to producers, gathering demographics about their audiences, and even collecting funds for new projects. Spotify alone is home to over 380 million listeners in 184 markets. These efforts create additional revenue streams in the form of royalties for music owners such as Warner Music.
And then there are live event companies like Live Nation Entertainment, which owns Ticketmaster. Others like Madison Square Garden Sports and Eventbrite could also benefit from increased attendance at in-person events.
Beyond investing in public companies, some investors have turned to crowdfunding companies like SongVest and Royalty Exchange to buy and sell music royalties at auction. These fintech companies estimate the value of a music catalog, determine the number of units available, and build a listing through public offerings. Investors then receive quarterly or semi-annual payments for their investments, similar to stock dividends.
For those more in tune with the industry, memorabilia and even musical instruments, such as vintage guitars and pianos, become collectibles over time, sometimes fetching tens of thousands of dollars (or more). ).
In short, some investors think the music industry could become the next big hit in their portfolios in the years to come.