I have decided this week to list a few areas of the economy that I believe are worthy of a look by investors. I base my thoughts on the well-known elephant theory that I teach regularly. It is that if you want to capture an elephant, you don’t sneak up behind it with a rope, but you decide where they herd is heading and get out in front of them and dig a big hole. Here are my thoughts on where I think the American herd is heading.
Healthcare: This sector has been strong so some may argue it has gone up high enough. But when I look at the size of the growing American population, and the aging of the large baby boom demographic, I only ask myself one question. Will Americans 10 years from now be using more or less healthcare than they use today? The political debate over who will be paying the bill does not concern me. I focus instead on the amount of dollars that the sector will be receiving, and I am very confident our healthcare needs and costs will be growing.
Technology: This sector has been hot for several years and for good reasons. One industry analyst put it in simple terms for investors. He said, “Everything that can be automated, will be automated. In cars, airplanes and dishwashers, the future is mainly about the software.” As I write this column, my little robotic vacuum is making the most beautiful vacuum lines you have ever seen as it carefully circles my chair. Technology has a long way to go to automate everything.
Leisure: This sector encompasses everything that has to do with recreation and vacationing. If you have been on vacation this summer you already know how crowded the hotspots are becoming. The newly retired and financially fat baby boom generation places a lot of value on seeing the world. They love to travel and they love to play. Whether it be cruise lines, hotel chains or theme parks, anything that fills the insatiable need of this generation to get out of the house and play is worth taking a look at.
Consumer Discretionary: This final sector focuses on products that people don’t really need but love to have when they are feeling good financially. Consider how often a package is delivered to your own front door these days, and those of your neighbors, and you will see the power of discretionary spending. Remember, not only are the baby boomers a huge generation, but they have mostly already earned their money, and love to spend it. Retired people don’t lose their jobs in a recession. So discretionary spending by this spend-happy generation is worth looking into.
These are not recommendations to invest but merely ideas to consider as you decide where to place your money. I have always found it best, when the herd is moving, to pay attention to the direction it is heading and get out in front if you can.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
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