Morgan Stanley’s Investing Trends for 2023

If you’re thinking future, think deglobalization, decarbonization, and technology diffusion, Morgan Stanley says. These trends are strengthened by changes in the macroeconomy, geopolitical events, and ongoing technological change, and investors may do well to consider them in their investments across asset classes.

Taking the long view may be the correct approach in the current investing climate, writes Michael Zezas, the bank’s Head of Global Thematic & Public Policy Research. And, investors should concentrate on “secular” themes, which are trends that span years and sectors, he says.

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First, deglobalization. With a changing world economy, companies and countries recognize that they can no longer seek efficiencies through global supply chains and market access without considering geopolitical risks, Zezas writes on the bank’s website. Practical implications of adapting include how long a transition will take, whether it will increase inflation, how such a transition would be financed, and which countries and companies would benefit.

Second, decarbonization. Transitioning from fossil fuels to clean energy brings opportunities and challenges, Zezas writes. The developed world is accelerating efforts to reduce carbon emissions, with growing EU support and the U.S.’s appropriation of more than $400 billion toward clean energy technology. Investors will need to be aware of the impact of the trend on companies, sectors, and macro markets. The clean tech industry is an obvious winner, as the passing of the Inflation Reduction Act (IRA) has provided significant federal support for solar, wind, hydrogen, energy storage, and carbon capture.

Third, diffusion, or the widespread adoption of new technology. What’s new about this trend, Zezas says, is the speed and scope of diffusion across sectors. Fragmented industries or ones with high regulatory barriers have typically not benefitted from tech-driven productivity, but they appear poised for a multi-year transition, he writes. Examples of tech disruptions to look out for include the effects of embedded finance on payments and tokenized assets on greater global financial inclusion, as well as the modernization of healthcare data ownership and breakthroughs in biopharma research and development.