By Brady Fletcher
The sharp decline of the Dow Jones in February served as a wake-up call to investors who’d grown comfortable in a bull market. As the dip grew deeper, investors continued to dump their stocks, and some experts predict an even deeper correction later this year.
But February’s decline isn’t indicative of widespread pandemonium. Rather, this expected correction reveals the discomfort of investors who realize that favorable market trends won’t continue forever. The market is now seeing a Goldilocks scenario—an investing environment that is neither “too hot” nor “too cold,” with sustained levels of growth that won’t cause inflation or trigger a recession.
So what does that look like, and which industries are poised to enjoy it?
Tracing the Factors That Impact Trade
Sometimes, industry growth is easy to understand, but these days, it may seem the usual criteria is changing. Understanding what drives an industry’s success requires a more careful look behind the scenes at the factors influencing different markets.
Consider Apple’s renewed focus on batteries. The companies that provide the materials for its batteries will likely enjoy the fruits of this increased demand. Companies that successfully reduce costs and increase efficiency in battery production may perform even better.
Beyond tech-centered factors, social factors also dictate where growth occurs. The recent attention around gun control in the United States that stems from school shootings may drive more attention toward companies that help detect concealed weapons, like Patriot One Technologies.
If you look at emerging companies, you’ll see that some smaller industries are catching up to bigger players. For example, evolving customer demands—like the growing anticipation of electric vehicles—open the door for artificial intelligence companies, mineral mining companies, and life sciences players to achieve real results and get investors excited.
The Ones to Watch
Not all companies or sectors will sustain the level of growth investors crave, especially as newer industries experience dramatic changes and respond to new regulations. Caveats aside, as you’re assessing the landscape, it’s worth considering the enormous potential of these four industries.
- Marijuana: The increasing medical needs of an aging baby boomer population indicate potential for medical marijuana. Several countries now see marijuana as a potential replacement for some pharmaceuticals—a move driven not only by the opportunity to collect taxes on a multibillion-dollar industry, but also by an increasing trend toward natural alternative medications. As the industry evolves, the tech, medical, regulatory and distribution components that make expansion possible will likely evolve along with it.
- Electric vehicles: Electric vehicles have opened the door for new investment opportunities beyond mass-market automakers. Charging stations, battery technologies, and related innovations, like AI and Internet of Things technology—many of which rely on mining outputs like copper, zinc, lithium, and nickel—all show capacity for rapid expansion. Given this tectonic shift, hyperloops are sounding less like science fiction and more like the future of transportation.
- Data security: In the wake of recent cyberattacks—including the Uber data breach and Equifax’s hacking scandal—people want to know that their personal information is secure. Money is flowing to the cybersecurity sector quickly: There are now eight cybersecurity unicorns valued at $1-plus billion, and a number of private startups have proven successful at securing funding. With the Securities and Exchange Commission’s new guidelines for public companies to disclose privacy breaches, it’s likely that interest in digital forensics and data protection technologies will only continue to grow.
- Blockchain: Cryptocurrency buzz has dominated the investment world for months, but the underlying blockchain technology may have major implications beyond its current financial application. The industry is exploring its place in solving voter fraud issues, for example, but the possibilities are endless. From enabling better cloud storage to securing sensitive contracts to protecting digital identities, blockchain is poised to play a major role in how we treat and store data across sectors. And as cryptocurrency energy consumption increases, renewable energy requirements will likely follow suit, spurring another industry to iterate in order to keep up.
Industries like these sit at the forefront of social issues and have enough capital to back up their potential. They won’t be the only industries to grow over the next decade, though. Wherever social pressures demand change and new technology creates opportunities, new industries will rise to the occasion.
Brady Fletcher is the managing director of TSX Venture Exchange, Canada’s public venture market.
