We live in interesting times. With Brexit and the Trump administration, the finance sector’s eight-year-old bull market is wandering into unknown pastures, with uncertainty regarding whether Britain and the EU can thrive once apart and whether an untested but wily self-promoter can successfully shepherd the world’s largest economy. While experts have predicted the bull market will continue to climb uphill this year, investment gains will be fair to middling as everyone plays wait-and-see -- while there’s no need to destabilize an upward market by withdrawing funds, few investors think now is the time to go all-in. In this time of uncertainty, people are still looking for safe, smart investments in 2017, so we thought we’d hand out some advice.
It really cannot be stressed enough how high uncertainty is in the first year of the Trump administration. With Republican control of the Presidency and Legislature, expect substantial changes to spending, regulation, and Federal involvement in business. While this all sounds great on its surface for anyone familiar with “pro-business Republicans,” it is important to remember the market is more volatile than “pro-business = good/pro-regulation = bad” and can respond negatively to what seems like good news. For example, investors fearing deregulation could lead to another financial collapse may pull out of the market if Congress reverses effective laws. With uncertainty so high, it’s best to expect returns in the mid-single digits, and that includes all of the predictions here.
Foreign Entanglements, Healthy Investments
President Trump may be country-first all the way, but investors in 2017 may need to get international to make a buck. Markets in Europe and Japan are down, meaning premium shares are going for a song and American investors can buy a stake in top companies likely to recover from the current downturns overseas.
Those keeping their money stateside should consider the healthcare industry, which came roaring back in 2016 after Trump’s victory, despite being slammed by Republican threats to repeal the ACA and Democratic concerns of drug prices.
It’s the Technology, Stupid
No matter where you live or how you vote, tech stocks remain a safe space in nearly any economy, with tech firms on the S&P 500 expected to report 12% earnings in 2017, beating out everything except energy and materials (which are both still recovering.) Microsoft and (MSFT) and Visa (V) both deserve a look, as do firms in cybersecurity like Palo Alto Networks (PANW) or Vanguard Information Technology (VGT).
Follow the Money
With interest rates on the rise, stocks in the finance sector become very appealing, especially given the chances of relaxed regulations. PNC Financial Services Group (PNC) and J.P. Morgan (JPM) are both likely safe bets, likely to bump if short-term interest rates rise. Consumer-facing businesses, especially those catering to consumers with money to burn are likely to do well as tax-cuts go into effect, including jewelers, restaurants, hotels, and premium discretionary funds.
Lending a Hand
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