The 5 Best & Worst Market Sectors to Invest in Over the Next Decade
Warren Buffett thinks it’s a good time to get into the market, and I agree with him for a number of reasons. I’m sure you’re thinking, “That’s great. Now What?”. When looking long-term (the next decade plus), there are a number of sectors that should produce solid returns for various reasons. However, the waters are murky, so you must be disciplined and follow the right recession investment strategy.
Undoubtedly, socioeconomic and political factors are going to have a profound impact on the market over the next decade as they have over the past 10 years. This validates taking a common sense approach to investing versus pouring through data and charts (which have their purpose). Let’s cover some developing trends that should create some winners and losers in different market sectors. Note that I’m not an expert and you should invest at your own risk.
5 Market Sectors to Invest in Over the Next Decade
1. Health Care: the number of seniors in the U.S. is rapidly growing, and there seems to not be enough health care professionals to meet the needs of our population. At the same time, health care is one of the last things people will sacrifice in a tough economy. Revenue and earnings are bound to increase.
2. Oil and other Fossil Fuels: the recent dip in energy prices presents a good buying opportunity. Despite an almost guaranteed recession, the demand for fossil fuels will trend upwards as the economy stabilizes, and supply production will eventually hit a peak. Energy stocks have very low valuations right now, resulting in high dividend yields.
3. Alternative Energy: What is shaping up to be an Obama victory would result in $150 billion in spending towards the development of alternative energy infrastructure. It seems inevitable that the established players in wind, solar, hydro and other sources will eventually become highly profitable with scaled and financed operations. Some are predicting that alternative energy and green jobs will lead to the next economic boom.
4. Water: This is a sector that has not boomed yet, and it is bound to. The world’s freshwater resources are diminishing, demand is increasing, and companies that invest in cleansing technology and infrastructure will prosper.
5. Precious Metals: Commodities like Silver and gold, which can be purchased through the ETF’s SLV and GLD, are near 52 week lows and I cannot understand why. They have been lumped in with all commodities, which had a huge peak and bust in the last year. Precious metals have always performed well when currencies struggle due to high inflation. The current credit crisis has led to an unprecedented level of debt and printing of money to rescue failed institutions. These things are bound to lead to higher inflation levels and weaker dollar values. All the more reason to own something tangible like precious metals. But be careful, commodity investing can be a bumpy ride.
5 Worst Market Sectors to Invest in Over the Next Decade:
When looking at where to pull money off the table, a few sectors could potentially be laggards in comparison to others. Sure there will be standout companies that are market leaders in each sector which should do well, and if you can find them at a good price, don’t let anyone discourage you.
1. Retail: Retailers struggle during recessions because people are tighter with their money. Many retailers are already seeing significant drops in same-store sales year over year. These trends should continue in the near future.
2. Tech: Tech startups are heavily reliant on credit to finance their operations. With limited available credit, especially for risky startups, many companies will not be able to survive, and those that do will have slower growth rates than in recent times.
3. Finance: There are some great values out there in the finance world right now, but it is very hard to tell which investments are free of risk at this point. In general, this is not the type of market to be playing with fire.
4. Industrials: During economic downturns, industry tends to slow down significantly. All you need to do is take a look at the auto industry to see that it will take a few years for a recovery to occur.
5. Transportation: Until economies of scale are fully exercised in terms of utilizing alternative energy sources, the transportation sector should see profits squeezed by high energy prices. The recent dip in oil prices seems to be more of a rest than a continuing trend.
Market Sector Discussion
- What market sectors of the market do you think will perform the best over the next 5 or 10 years?
- Which will perform the worst?
- What trends do you see continuing, developing, or disappearing that will effect the market significantly?