Jim Jubak’s year-end article highlights 10 key trends for 2009 and notes that knowing the hot sectors in 2009 should help the investor beat the market. From the article:
10 macro trends
Take a look at my 10 macro trends, and afterward I’ll explain which are hot and which are not for 2009. In my book, you’ll find a chapter devoted to each:
- Go where the growth is, and that means putting some money into the developing economies of China, India and Brazil.
- The rise of the global blue chips. These companies are emerging from the world’s developing economies to challenge Coca-Cola (KO, news, msgs), IBM (IBM, news, msgs) and Wal-Mart Stores (WMT, news, msgs) on the global stage.
- The world is getting wealthier and older at the same time. So who’s going to manage all that retirement money?
- Inflation is beginning a new era. After 20 years of low inflation, the world is headed for a decade of rising prices.
- The world may not be running out of oil — then again, it might be — but it sure has run out of cheap oil. You can make back in the stock market what you pay at the pump — and more.
- The commodity crunch. Developing economies are demanding more iron, more copper, more nickel, more coal — and that has set off a boom for mining companies and the companies that equip them.
- Food is the new oil. It’s turning out to be as hard to increase food supplies as it is to find new oil. We’re looking at a decade of higher food prices driven by competition with biofuels and the fact that people in the developing world will eat more pigs, chickens and other sources of protein as their incomes rise.
- We’ve dragged our feet, but environmental problems have become so pressing that it’s time to save the world and make a buck.
- The technology sector doesn’t look anything like it used to, but fortunately the same rules still apply to what I call “hidden tech” stocks.
- It used to be that stocks and bonds from the United States got a premium in the financial markets just for showing up. Investors were willing to pay more because the U.S. markets were so stable. They’re still among the world’s best in that category, but now they’ve got company from Canada, Australia and, of all places, Brazil.
What’s hot for 2009? You can see the news moving toward three of these trends and setting up stocks in these sectors for better-than-market gains.
The hot trends for 2009 are:
- Inflation. Gold has started to move up. The U.S. dollar has started to move down. Overseas investors are cutting back on their purchases of dollar-denominated debt. And the faithful news consumer can see the beginnings of a tidal wave of articles and editorials worrying about the inevitability of inflation now that the Federal Reserve has decided to pay overtime to the crew that prints paper money.
- Food. Yes, food commodity stocks collapsed in 2008. And, yes, prices for food commodities went into a retreat that turned into a rout; the prices of major grains are down 50% from their 2008 peaks. But don’t count on food getting cheaper still in 2009. All the signs point the other way. The United Nations’ Food and Agriculture Organization has warned that because of the global credit crunch, many farmers lack capital to buy seed and fertilizer for the 2009-10 growing season. That’s likely to show up in commodity prices, via the futures market, by mid-2009.
- Stability. Companies able to deliver solid revenue and earnings at or maybe even a little above expectations are rare as hens’ teeth at this stage of the recession. Companies with those kinds of results are also in a position to use the current global slowdown to attack weaker competitors, buy market share and aggressively develop new products. That’s a combination investors particularly prize in the current uncertainty.
I’d give those three trends green lights right now. You can start building positions in these trends in the first half of 2009.
In contrast, I’d say the following trends are stone-cold for 2009: the commodity crunch, a world running out of cheap oil, and a world that’s getting older and wealthier. Those trends are still likely to pay off big in the long term — say, five to 10 years — but in 2009, commodity, energy and financial stocks have suffered too much damage for a quick recovery. We’re still looking at six months or more of crisis in these sectors as companies with big debt loads struggle to roll them over in a debt market with a severe shortage of buyers.