In a Flourishing Stock Market, Which Sectors Should You Choose?
Analysts all have their own ideas and forecasts when it comes to the hottest sectors to invest in.
The S&P 500 Index suggests the top sectors are Information Technology,
Consumer Discretionary, Industrials and Real Estate. James Stack, editor of InvesTech Research suggests Health Care, Technology, Consumer Staples, and Industrials. Richard Moroney, editor of Dow Theory Forecasts, recently ranked his favorite sectors, Technology, Healthcare, REITs, and Materials.
While analysts all have their own methods for picking the sectors they think are more worthwhile, there are many recurring themes. The sectors we suggest to our own clients, are:
The REIT sector was hit hard at the end of 2018, when investors feared interest rates were going to continue to rise. But rate fears have lessened, and the sector is doing very well with the strong economy, and with the average dividend yield of 4.14%, they remain very attractive for cash flow.
Due to the same interest rate fears, financials had a downturn at the end of the year. But, like REITs, they have started to pop back up, albeit with a bit more volatility. The average bank stock P/E (price-to-earnings) ratio is 18-21, but many banks are still undervalued, and trading at P/Es around 11-14. In addition, most banks pay at least a 1% dividend yield, so you get cash while you wait for appreciation. The strong economy should continue to boost bank stocks.
To hedge your bets just in case the economy does begin to falter a bit, it’s good to keep some fairly secure stocks, that do well even in a slower economy. Consumer Defensive Stocks fit that bill.
All the political wrangling in D.C. has created much frustration and uncertainty in the Healthcare segment. However, our nation is not getting any younger, and there are plenty of opportunities for growth in this arena. You can be as speculative as you like, with biotechs, or stay a little more conservative, with medical device stocks.