BlackRock strategists recommend investors dip back into growth and tech for next year, but they say picking selective themes will be the best way to play them. In a new report released Monday , ETF strategists at the firm identified themes in growth, tech and health care that they expect could do well over the medium to long term. “I think the most common question we’re getting from investors is when do I get back into growth? From April, 2020 to the end of 2021, really buying anything in growth proved to be a successful strategy,” said Jay Jacobs, U.S. head of thematics and active equity ETFs. “Obviously, that unraveled in 2022.” BlackRock strategists say 2023 could be the year that changes the three-year pattern of growth and tech stocks moving in unison, both higher and lower. Jacobs, a co-author of the report, said he expects there will be much more dispersion, or a wider range of performances in the growth area, so investors will be able to find opportunities but they need to be discerning. “People should be looking more precisely. We should be looking within growth at areas that could weather the economic storm, plus provide long-term growth tailwinds,” said Jacobs. One place to look is among sectors that would be helped by trillions of dollars in fiscal spending, both from the U.S. Inflation Reduction Act and the Infrastructure Investment and Jobs Act [IJAA], as well as the European Union’s Global Gateway. Jacobs said fiscal policy is providing a ballast, and the more protected areas are going to be ones where there is more certainty in demand and dollars allocated by government. More than $1.5 trillion of U.S. spending is targeting infrastructure, clean energy and electric vehicles in 2023 and beyond. The EU’s Global Gateway expects to spend 300 billion euros. About $110 billion of spending under the IIJA has been announced for 2023. ETFs that fit these themes include BlackRock’s iShares Self-Driving EV and Tech ETF , the iShares Global Clean Energy ETF , and iShares U.S. Infrastructure ETF. For instance, U.S. spending for electric vehicles includes $7,500 consumer tax credits for new EVs, plus a $4,000 consumer credit for used vehicles. BlackRock strategists also note that the U.S. plans 75,000 miles for new EV charging infrastructure. There are also tax credits for battery and material processing and $22 billion in grants and loans for manufacturing facilities. In technology, the strategists picked areas that could be better positioned for a downturn. “On one hand you have moonshot technologies that are unproven but exciting,” said Jacobs. But other technologies that are already providing profits may be better investments now. “Cybersecurity is one area. We’ve seen cybersecurity attacks increased 81% compared to pre-pandemic levels,” he said. He also said companies want to find technological solutions to inflation, including from labor shortages and supply chain issues. “We are going to see a lot more investment in robotics and automation going forward,” he said. There is the iShares Cybersecurity and Tech ETF , IHAK and IRBO, the iShares Robotics and Artificial Intelligence Multisector ETF. Jacobs said another area that is appealing for growth opportunities is health care. “Forty-nine out of the last 50 years, health care expenses grew in the United States. What excites us is there’s a pretty long pipeline of really interesting breakthrough drugs,” he said. He favors the areas of health innovation including genomics, immunology and neurology. BlackRock Future Health ETF, i Shares Genomics and Immunology and Healthcare ETF, and iShares Neuroscience and Healthcare ETF cover those themes. Jacobs said for the stock market as a whole, interest rates are going to dictate broad moves. “If we saw rates were going to be cut next year, we might be more favorable to growth in general,” he said.
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