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Visualized: Three Investment Opportunities for the Future

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Investment Opportunities

Investment Opportunities

This infographic is available as a poster.

Visualized: Three Investment Opportunities for the Future

With proposed government spending initiatives set to reach $6 trillion, the U.S. could be entering a new era of economic potential.

Sweeping measures have been proposed to support the economy—reaching levels of sustained spending not seen since WWII. These include a $2.3 trillion American Jobs Plan and a $1.9 trillion American Rescue Plan.

But how will this affect financial markets, and what investment opportunities does this present? As we look ahead, this infographic from New York Life Investments explores three potential areas of growth.

Three Investment Opportunities

Here are key trends that could shape the future—creating new opportunities for investors—as government spending increases:

1. The Strategic Role of Debt

In 2021, corporate debt sits at roughly 50% of U.S. GDP.

Importantly, COVID-19 relief packages helped offset a wave of defaults. Yet at the same time, a record $1.7 trillion in corporate debt was issued by nonfinancial companies in 2020—$600 billion higher than the previous peak. This rise in debt may offer potential investment opportunities.

In a low-interest rate environment, debt is relatively less expensive for companies to hold than during periods of high interest rates. This means they can invest in their business, make acquisitions, and gain greater market share.

Companies with investment-grade debt, which have stronger ratings from credit agencies, will likely be better positioned to make strategic business moves and mitigate the potential of future default.

2. Digital Infrastructure

There are several core components that underpin technology today:

Semiconductor chips: Key components in electronics such as smartphones, computers, refrigerators, and cars. As electronics proliferate, semiconductor companies may provide windows of opportunity. By 2030, electronics are projected to make up 45% of a car’s cost, up from 18% in 2000.

Broadband: Infrastructure required for internet access, including in rural and remote areas. Across OECD countries, broadband subscriptions per 100 people is just 33.3, illustrating a gap in access to high-speed internet. 5G, fiber optic cable, and internet infrastructure companies could offer the essentials that are needed.

Hyperscale cloud providers: Enable vast amounts of data and computing power to operate on cloud-based platforms, often in real time. With average gross margins of 57% and net debt to equity of 4%, cloud computing vendors could be poised for growth as data expands exponentially.

3. Emerging Markets’ Growing Middle Class

In the last two decades, emerging market (EM) income per capita has doubled. As disposable incomes rise, the consumer landscape is shifting towards more sustainable products.

Willingness to Pay a Premium for the Following Attributes% of Respondents
Contains organic/all-natural ingredients41%
Contains environmentally friendly/sustainable materials38%
Offers/does something no other product on the market provides37%
Delivers on social responsibility claims30%

Source: Conference Board Global Consumer Confidence Survey conducted with Nielsen. Data as at June, 2020.

Notably, the plant-based meat market in Asia is projected to grow 15.9% annually by 2026. In fact, global consumer searches for sustainable products have grown 71% since 2016.

Forces of Change

At this critical juncture in spending lies new investment opportunities. While it’s impossible to predict the future, strong underlying trends provide clues for how investors can think about positioning their portfolio.

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Infographics

The 5 Fastest Growing Industries of the Next Decade

We reveal the five fastest growing industries of the future, within broader sectors such as healthcare and technology. Which industry will be number one?

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Fastest Growing Industries

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The Fastest Growing Industries of the Future

Today, the U.S. economy looks very different than it did hundreds of ago. While railroad stocks dominated in the 19th century, industries within technology and healthcare have grown substantially in recent years. As dynamics continue to shift, what will be the fastest growing industries of the future?

In this infographic from New York Life Investments, we uncover the industries projected to see the fastest growth rates over the next decade.

What Are the Fastest Growing Industries?

The U.S. economy is growing. From 2019 to 2029, total industry output is expected to rise by more than 20%.

Output is the value of final goods and services, as well as intermediary sales that are not typically included in GDP. In this case, output is based on chained 2012 dollars, which is a method of adjusting real dollar amounts for inflation over time using 2012 as a base year.

Below, we count down the fastest growing industries from 2019 to 2029, according to projections from the U.S. Bureau of Labor Statistics.

#5: Outpatient Care Centers

This industry is defined as facilities where the patient is not required to stay overnight, such as:

  • Mental health and substance abuse centers
  • Family planning clinics
  • Dialysis clinics
  • Multidisciplinary clinics

As patients demand more convenient and less expensive care, the popularity of outpatient care centers has grown. Advances in medical technology, such as minimally invasive surgeries, also allow for same day release. Here is what projected growth looks like for the industry.

Compound Annual Growth Rate3.2%
2019 Output$122B
2029 Output$168B

However, investors may want to consider that health care leaders say implementing information technology (IT) is their greatest challenge.

#4: Computer System Design & Related Services

Companies that primarily provide IT expertise fall within this industry. Here are some examples:

  • IT consultants
  • Programming services
  • Video design
  • Web page development
    • The growth of e-commerce and digital marketing will likely contribute to the industry’s success. For instance, U.S. e-commerce climbed by 32% in 2020. Buoyed by these trends, computer systems design companies are expected to have a compound annual growth rate exceeding 3%.

      Compound Annual Growth Rate3.2%
      2019 Output$518B
      2029 Output$712B

      On the other hand, investors may want to watch for the high capital costs some IT companies could incur to upgrade outdated platforms.

      #3: Oil & Gas Extraction

      This industry includes companies involved in the preparation of oil & gas, up to the point of shipment from the producing property. Some examples are:

      • Integrated oil & gas companies
      • Drilling contractors
      • Exploration & production companies

      As inflation rises, extraction companies may benefit from higher prices and wider profit margins. The industry is expected to have the third highest growth rate over the next decade.

      Compound Annual Growth Rate3.4%
      2019 Output$474B
      2029 Output$660B

      However, investors may want to consider the growing traction of sustainable investments. While oil demand isn’t projected to peak until 2035, the shift to clean energy may cause long-term challenges for the industry.

      #2: Information Services

      Businesses that supply, search for, or publish information fall within this industry. Some examples are:

      • News syndicates
      • Internet publishing
      • Broadcasting
      • Web search portals

      Consumption of trusted news brands is growing, and paid subscriptions are increasing in richer Western countries. In addition, Google has committed at least $1 billion to license content from publishers for its News Showcase product. Here’s what potential growth looks like for information services companies.

      Compound Annual Growth Rate4.2%
      2019 Output$243B
      2029 Output$365B

      On the other hand, ad revenue is falling in some segments. Investors researching this industry may want to consider platforms that are diversifying their revenue streams.

      #1: Software Publishers

      Topping the list of the fastest growing industries is companies that design, install, and provide post-purchase support for software. Some examples are:

      • Cybersecurity
      • Graphic design
      • Operating systems
      • Customer relationship management

      Amid remote work and e-commerce growth, software enables companies to connect with employees and customers. The industry is projected to have a compound annual growth rate of almost 5% from 2019 to 2029.

      Compound Annual Growth Rate4.8%
      2019 Output$236B
      2029 Output$378B

      At the same time, the industry has relatively low barriers to entry. Investors may want to watch for competitors, which can pop up anytime and threaten existing companies’ market share.

      Industries of the Future

      Investors with a long-term view can consider investments in these high potential areas. Propelled by market trends, the fastest growing industries fall within three broader sectors:

      By looking to the future, investors may be able to capitalize on industries poised for growth.

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Infographics

Five Trends for Investors to Watch Amid a COVID-19 Recovery

As economies face structural shifts, this infographic covers five trends that have the potential to alter financial markets amid a COVID-19 recovery.

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5 Trends for Investors to Watch Amid a COVID-19 Recovery

If history tells us anything, crisis forges change.

Like other pandemics throughout history, COVID-19 led to tectonic shifts in society, markets, and government policy. People and businesses are rethinking traditional work structures, while inflation concerns are rising amid trillions in stimulus injections. But what impact does this have on investors?

To answer this question, this infographic from New York Life Investments pinpoints five trends to watch amid a COVID-19 recovery.

1. Inflation

Today, investors are closely watching inflation. Core factors that influence inflation include:

  • Increasing money supply
  • Rising raw materials costs

Between 2020 and 2021, the money supply in the U.S. rose over 28%. Meanwhile, building materials and supplies, as shown through the producer price index, have jumped 44% between May 2020 and May 2021.

In fact, as of May 2021, inflation has seen its greatest rise in over a decade, with year-over-year figures increasing 5%.

The Opportunity

To hedge against potential inflation risk, investors can consider the following asset classes:

  • Infrastructure
  • Bank loans
  • Gold
  • Commodities
  • Real estate
  • Treasury inflation-protected securities (TIPS)

2. Innovation

How companies navigate digital disruption will likely affect their revenues and future operations. Notably, during COVID-19, companies that adopted new technologies saw higher revenues than their peers, according to one survey.

Companies that reported over 25% revenue growth  
First to experiment with new technologies during the crisis72%
Not the first to experiment with new technologies during the crisis33%
Invested more in digital-related expenditures67%
Did not invest more in digital-related expenditures31%

*Responses from 899 C-level executives and senior managers representing the full range of regions, industries, company sizes, and functional specialties. Compared to industry peers, time period is over three years.
Source: McKinsey, 10/05/20

The Opportunity

Frontier technologies have the potential to reshape markets and productivity both during and after a COVID-19 recovery. Here are among a few examples:

  • Artificial intelligence (AI)
  • Big data
  • Internet of things (IoT)
  • Robotics
  • Solar photovoltaic (PV)

3. ESG

Environmental, social, and governance (ESG) investing continues to break records, attracting nearly $2 trillion in assets as of Q1 2021.

 Global ESG assetsGlobal ESG fund flowsGlobal ESG funds
Q1 2020$841.5B$45.7B3,297
Q1 2021$1.9T$185.3B4,524

Sources: Morningstar 04/30/21, Reuters 01/28/21

The Opportunity

Within the sustainable investment landscape, three particular segments may be poised for potential growth: green bonds, solar PV, and transition finance.

Green Bonds: In the last year, green bond issuance has quadrupled to $131 billion globally.

YearGlobal sustainable bond growthNumber of issues
Q1 2015$6B22
Q1 2016$14B30
Q1 2017$26B58
Q1 2018$28B84
Q1 2019$39B123
Q1 2020$35B123
Q1 2021$131B314

Source: Refinitiv 04/23/21

Solar photovoltaic (PV) installations: Global solar PV installations are set to rise roughly 28% over two years.

YearPV installations (conservative)PV installations (optimistic)
2020e129145
2021p151194
2022p165205

Source: Bloomberg NEF 03/01/21

Transitional finance: These are financing tools designed for big carbon polluters to adopt greener alternatives. In the future, these types of vehicles could accelerate. For instance, bonds whose interest rates would likely increase if sustainability targets aren’t met.

4. Future of Work

Since COVID-19, job markets have faced a historic change. One study shows that 22% of the U.S. workforce are projected to be working remotely by 2025, equal to roughly 36 million Americans.

 Percentage of respondents
Employees who would prefer to work from home42%
Percent of the workforce projected to work from home by 202522%
Would maintain traditional working-at-the-office schedules10%

Sources: Center for the Digital Future 08/26/20, Upwork 12/15/20

The Opportunity

As traditional work models shift, key industries could be impacted, for instance:

Video conferencing: Global market size is projected to jump from $9.2 billion in 2021 to $22.5 billion in 2025.

Office space: Future office space preferences are changing. According to one study, here is how CEOs view their office space needs going forward.

  • 76% less office space is needed
  • 18% no change
  • 6% more office space needed

Interestingly, it is estimated that one-third of power, utilities, and renewables companies are looking to add more office space going forward.

5. Healthcare

Health costs related to the pandemic are set to reach a staggering $2.6 trillion.

At the same time, digital healthcare investment hit record levels last year:

    • 2020: $21.6 billion
    • 2019: $13.9 billion

The Opportunity

Especially as behavior shifts to digital platforms, the demand for healthcare innovation is likely to expand. Here are three segments of health expenditures, and their potential to be virtualized:

      • Urgent care visits: 34%
      • Office visits: 24%
      • Home health visits: 20%

One estimate suggests that 20% of all healthcare spending in the U.S. could be conducted virtually, worth $250 billion.

COVID-19 Recovery: The Next Stage

New and powerful trends—from AI to ESG investing—have the potential to structurally change systems and industries.

At the same time, many of these trends aim to solve complex problems. How investors adapt could have lasting effects on their portfolios. Thanks to these underlying shifts, new opportunities for investors are underway amid a COVID-19 recovery.

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