After a stock rally driven by better-than-expected inflation figures in November, the Fed and the ECB reiterated their hawkish stance in December, while the BoJ widened the target corridor for Japanese government bonds. Equity markets reacted by edging lower in December. 2022 saw the worst drawdown for equities since 2008. Against a backdrop that remains uncertain, our thematic investment team identifies a number of key developments that investors should consider:
- Stage set for biotech’s recovery: Strong clinical trial results, the introduction of novel treatments and M&A activity will likely drive biotech’s outperformance in 2023. Following Biogen and Eisai’s success with Alzheimer’s disease, Madrigal Pharmaceutical published clinical trial results that positively surprised analysts, for a drug targeting an advanced form of fatty liver disease. Additionally, healthcare companies with high exposure to China should benefit from the country’s reopening.
- EVs catch their breath: Sentiment around electric vehicles weakened for the first time since the pandemic, on the back of worries about demand, competition, and high electricity prices (particularly in Europe). Uncertainty on the short-term EV outlook created some headwinds for power semiconductor companies, although their technology remains critical in light of the global electrification trend.
- Savings in tech: As companies remain concerned about the risk of recession, they are delaying or even cancelling spending on non-mission-critical IT. In the face of elevated energy prices, data centres are working on reducing their use of cooling systems to curb energy consumption. Meanwhile, generative AI is becoming more mainstream as OpenAI released its innovative search-like tool ChatGPT.
- Consolidation in nutrition: Dietary improvements require broader multi-ingredient products and capabilities, which is driving consolidation in the ingredients sector. A new milestone in the consolidation has been reached with the merger between Christian Hansen and Novozymes. We also expect the merger between DSM and Firmenich to close in early 2023.
