The Best Themes on the Stock Market in 2023

A look back at a good stock market year

2023 was definitely a good year for the stock market. Many indices rose significantly. The Nasdaq rose by over 53%. The S&P500 was up 24%. Outside the US, the CAC40 rose by 16% in France, the DAX by 20% in Germany and the OMX 30 by 17% in Sweden.

However, the results vary widely by sector and theme. Let's take a look at the themes which, in my opinion, were the most promising for the year.

Artificial Intelligence

AI was the most talked-about topic. Unsurprisingly, many of the stocks associated with this theme were very high up in the year's best stock market performance rankings. Undoubtedly, it will also be an important theme for the coming years. It is unlikely, however, that this kind of performance will be repeated quickly, as the market needs a breather.

• NVidia +240%

• Palantir +167%

• AMD +127%

• Adobe +77%

• Microsoft +56%

Cryptocurrencies

Stocks associated with cryptocurrencies have risen along with them. Beware, however, that these are highly volatile stocks.

• Iris Energy +472%

• Coinbase +391%

Cloud

The cloud sector was already a major trend in recent years. After the consolidation of 2022, they recovered and continued to grow, which doubly benefited this year's performance.

• Arista +94%

• Cloudflare +84%

• Alphabet +58%

• Microsoft +56%

Semiconductor

The market is anticipating a bottom of the cycle for semiconductors, as demand could increase and overstocks have been absorbed. Some stocks have recovered well after a complicated 2022. These actions were also helped by the AI theme.

• Disco Corporation +177%

• BE Semiconductor +141%

• Broadcom +99%

• ASM International +99%

• Intel +90%

• LAM Research +86%

• Micron +70%

• Cadence Design Systems +69%

• Applied Materials +66%

• Synopsys +61%

• KLA Corporation +54%

Cybersecurity

Cybersecurity continues to be a major stake, both with the digitalization of all business sectors, the rising costs associated with cyberattacks, and the defense challenges posed by geopolitical conflicts. No doubt, this sector will continue to shine.

• Crowdstrike +142%

• Palo Alto Networks +111%

• ZScaler +98%

Travel

Benefiting fully from the post-covid recovery in tourism and the excess liquidity of Western households, some stocks have performed exceptionally well this year.

• Royal Caribbean +161%

• Carnival +130%

Anti-obesity drugs

Anti-obesity drugs from Novo Nordisk and Eli Lilly were the real movers in the otherwise underperforming healthcare sector this year. The addressable market seems immense. What will be the real impact on other markets (food, non-alcoholic beverage, …)? Only time will tell.

• Eli Lilly +59%

• Novo Nordisk +52%

E-Commerce

The sector's giants have performed incredibly well, again helped by their counter-performance in 2022.

• Mercadolibre +85%

• Amazon +80%

Technology

Generally speaking, and despite the rise in interest rates by the major central banks, the performance of technology stocks has been impressive. Investors see them as themes for the future. Furthermore, they are often highly qualitative, with low capital intensity, high margins, significant moat and impressive FCF-generating capacity.

• Salesforce +98%

• Atlassian +85%

• Servicenow +81%

• Manhattan Associates +77%

• Datadog +65%

• Nemetschek +64%

• Intuit +60%

• The Trade Desk +60%

Conclusion

Past performance is no guide to future performance. However, many of the above themes are long-term ones. We can only emphasize that markets appear expensive in the euphoria of corporate performance and the expectation of lower interest rates.

This euphoria creates a risk that needs to be monitored. Could this be the return to favor of more defensive sectors such as healthcare, consumer staples and utilities? What do you think?