The global economy will slip into recession in the first quarter of 2023 (if not already). A typical recession lasts 15 months (18 months in 2008) followed by 48 months of expansion. So which are the most resilient sectors ready for investment and growth?
Lessons from 2008 to 2022: Top Performers and Macro Changes
In 2008 there was no iPad, the dominant enterprise smartphone was the Blackberry, and the dominant network technologies were GPRS, EDGE, and 3G.
This is a good start, but many things have changed.
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Today, we are used to doing everything remotely (work, healthcare, staffing, freelancing) without compromising productivity. We’ve also seen increased volatility in food shortages, energy transitions, and security issues, with the Chicago Board Options Exchange’s CBOE Volatility Index, which measures general market sentiment, currently trading 25% higher, with U.S. It shows an increase in overall risk levels. market.
Finally, inflation cannot be ignored. The cost of goods rises, incomes fall, and layoffs make investments difficult.
The 2023 Recession: Top 8 Investment Sectors
Given the macro changes, here are the sectors that are likely to thrive. It’s not an exhaustive list, but it highlights key resilience characteristics: being mission-critical, being productive with limited resources, and a general escape to quality.
- Digital health: Even as incomes decline, people still need healthcare. However, the recession still hits companies, increasing debt, capex/operating expenses and reducing cash flow. Successful healthcare companies are those that add productivity to their existing infrastructure and enable robust patient monitoring and tracking (doing more with less).
- Discount/Used Goods, Consumer Goods, Circular Economy: Dollar General outperformed all stocks in 2008, up more than 60%. A recession induces layoffs, reduces income, and makes households buy less or cheaper. Expect discount retailers, pre-owned, asset-light, customer-focused marketplaces, re-commerce of “must-have” or previously-owned product distributors to win.
- Budget travel and leisure: Rising energy costs have made travel prohibitively expensive. A shift towards local activities is expected. That’s why we’re seeing a surge in bookings and new hosts for Airbnb Experiences. Bet on companies involved in infrastructure to enable local travel and experiences.
- logistics: We have not fully recovered from 2020 and the entire supply chain is still under stress. We see particular potential in terms of productivity, such as mapping tools, route planning, resource management, and seamless APIs for connectivity.
- Personal service: Two themes — (1) accounting and tax services remain pensions, and (2) mass layoffs lead to the creation of new companies and the rise of freelance workers. Companies that work on a freelance workflow from finding their next gig to issuing an invoice and getting paid should be successful.
- Critical Stack SaaS only: Only SaaS with easy measurable ROI due to cost is safe. Remember the 3 C’s. If the company does not help control costs. If it’s not mission-critical and doesn’t help you keep your business in control, you may face headwinds.
- Energy reset: We are in the midst of a global energy transition from fossil fuels to decarbonisation. Two areas of focus are energy management efficiency and grid digitization to balance multiple sources (wind and solar) in preparation for the transition.
- Remote everything: 2020 has changed the future of work forever, with more businesses adopting remote teams in low cost-based markets to stay productive and increase profitability. Businesses that help identify, hire, onboard, pay, process taxes, or train remote staff may benefit.
Farewell Thoughts: Buckle up, it’s gonna be a bumpy road
While there are some other promising trends in the early stages, these eight major sectors could weather the recession that will be the bulk of digital transformation over the next 24 months.
Rajive Keshup is an Investment Director at Cathay Innovation, based out of our Singapore office. Prior to joining Cathay, Keshup played a key role in scaling many Southeast Asian start-ups. Before he moved to Singapore, he was Managing Director at PwC Strategy (formerly Booz & Co.) in New York City where he was a Director and Head of the company’s Private Equity Practice. .
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