5 Investment Sectors That Will Soar in 2023 | Top Dollar (2024)

Due to geo-political factors and global inflationary pressure, 2022 was filled with uncertainty about the state of the world’s economy. Even now, as the U.S. stands on the brink of a recession, the stock market’s near-term outlook is highly uncertain.

However, with a new year comes new opportunities, and even in challenging economic conditions, many industries can emerge and prove themselves, providing hope to all investors in the market.

Here are 5 sectors that should be big winners in 2023.

1. Consumer Staples

In times of economic downturn and inflation, industries driven by consumer needs often outperform the broad market. As a part of the defensive sector, in 2022, the consumer staples industry outperformed the broader market.

While the S&P 500 fell drastically, closing with a loss of 19.4%, the consumer staples industry sustained itself against the falling economy and emerged somewhat unscathed, with only a loss of 3.3%.

Although the economy isn’t technically in a recession yet, it is still in a downturn, and inflationary pressure can significantly impact consumers’ demand for unnecessary goods. This means that the industries in the defensive sectors, including the consumer staples industry, are safer in the current environment and may even outperform the broader markets again.

According to Forbes, some of their favorite consumer staples stocks to invest in 2023 are Costco Wholesale Corp (COST) and Walmart Inc (WMT).

2. The Healthcare Industry

The healthcare industry has always been a part of the defensive sector. After all, how many people refuse to go to the hospital when the need arises or stop taking lifesaving medicines due to inflation?

The defensive nature of the healthcare industry has always allowed the sector to sustain itself during tough economic times, showing resilience in the face of challenging market conditions and only incurring a loss of 4.4%.

The healthcare industry was a top performer during 2022, and as the U.S. inflation remains high, the healthcare sector may likely outperform due to its defensive nature.

Buying stocks in the healthcare industry or adding them to your investment portfolio is a great way to take advantage of the opportunities in this sector. You can buy stocks such as the UnitedHealth Group Inc (UNH) and Eli Lilly and Co (LLY) or buy a healthcare sector ETF such as XLV.

3. Energy Industry

In 2022, high demand coupled with issues in the supply chain allowed the energy industry to profit off high prices and grow more than 50% over the year. While the rest of the market experienced massive losses, the energy industry was able to stay afloat and even turn a profit.

As the world moves into 2023, supply chains in the energy sector can barely keep up with the high demand, leading to decreased supply across the industry. Experts believe that, although it’s unlikely that the sector will replicate its 2022 success if the current conditions prevail, it can still overperform the S&P 500 index, albeit by a smaller margin. Several energy commodities, such as oil and natural gas, have already seen significant declines due to the mild winter and possibly have significant room to rebound through the remainder of the year.

Despite experts predicting slower growth, the energy industry is still likely to perform stronger during the second half of 2023. For example, consider investing in an energy ETF such as XLE or other low-cost ETFs.

4. Information Technology

Despite having a bad year, the tech industry is slowly regaining its performance in 2023. The tech sector fell by around 14% in 2022 but is getting back on its feet and has grown almost 15% YTD.

Although the greater geo-political and macroeconomic issues are creating hesitancy among investors, the industry is brimming with opportunities after a massive sell of in 2022. Technologies such as AI (artificial intelligence) and cloud computing will continue to grow in demand due to their flexible nature and cost-reduction benefits.

It’s projected that the AI industry will be worth $93 billion in 2023, which is a 12% increase from 2022. Similarly, the cloud computing business is expected to grow by 15% by the end of 2023. Crypto is also on the rise again as some of the largest cryptocurrencies on the market grow. In January 2023, Bitcoin (BTC) prices started the year by rising more than 37%, and Ethereum (ETH) prices rose 30%.

As the economy slowly recovers from the multitude of geo-political forces and investors regain their confidence in the market, the technology industry will perform substantially and make it big in 2023.

5. Business Services

The business services industry, categorized into business-to-business, social, and business-to-consumer services, experienced a high positive growth rate in 2022. Despite the ongoing geo-political and economic downturn, the industry grew from $624.82 billion in 2022 to $681.66 billion in 2023 at a rate of 9.1%, showing resilience in these uncertain economic times.

The business services industry is projected to grow to $931.35 billion in 2027, showing promising signs of strength and growth. Going into 2023, the industry offers promising performance and will likely be one of the year’s big winners.

Final Thoughts

Fear of recession coupled with increasing uncertainty in the market can result in many industries underperforming. The market is generally forward-looking and always rewards companies that have the best earnings prospects over the next 1-2 years.

Similarly, sectors like the energy industry and the technology industry have opportunities that allow them to sustain themselves and rebound upward in the events after an economic downturn. Watch out for these five industries and invest wisely so that when they make it big, so do you.