As we head into 2023, it's important for investors and business leaders to understand which sectors are attracting the most investment from lenders. In this article, WealthStock Founder & CEO Andrew Glaze, a 20-year public markets investment veteran, shares his insights on which sectors are most attractive to capital allocators and why.

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According to Glaze, the top sector picks for all capital allocators (credit and equity) are healthcare and industrials, including those with commodity exposure but not full commodity risk (pipe lines, cutting edge oil exploration equipment manufacturers). Lenders are attracted to these industries for different versions of the same reason: long-tail macro winds are driving healthcare (aging population, extremely well-capitalized and efficient drug companies with pricing power) and infrastructure (sudden increase in global onshoring meets an ailing and underinvested infrastructure).

This makes industrials and healthcare, as well as commodity & infrastructure plays, the hot ticket for 2023. Businesses with predictable cash flows, such as capital equipment companies, are also set to see a capital investment super-cycle as reshoring supply chains, grid modernization, and investments in renewable energy drive demand for capital equipment spending.

Glaze notes that years of globalization have led to underinvestment in machinery, plants, and other capital projects, leading to an aging factory footprint behind the manufacturing sectors of most developed markets. This means everything from ball bearings to large bulldozers are going to be in heavy demand, which means for the industrial sector in general operating leverage and significant jumps in cash flow.

He also pointed out that Environmental, Social, and Governance (ESG) is becoming an increasingly important issue in credit markets. For now, it has primarily been focused on clean energy-related plays, but with ESG-related credit now half of Europe's new issue in 2022, this is a trend that bears watching in the US and may prove to be a boon in the form of easy access to capital for businesses that are firmly in the ESG camp.

With the market in a state of flux, it's important for investors and business leaders to stay informed about which sectors are attracting the most investment from lenders. Glaze's insights provide valuable guidance on which sectors are most attractive and why, as well as the potential implications of the growing focus on ESG in the credit markets.