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The Significance of Secular Megatrends Trends Secular trends refer to significant movements or changes in a direction that continue regardless of short-term market variations or economic shifts over years or decades, and are typically influenced by fundamental alterations, such as technological progressions, demographics, changes in consumer preferences, or government or monetary policy. Let's look at three examples of megatrends. A Meteoric Innovation Shift Legendary investor Warren Buffett once shared a simple, but incredible piece of wisdom: "For 240 years it's been a terrible mistake to bet against America. The babies being born in America today are the luckiest crop in history." Buffett's words may seem obvious, but they are profound when you consider how much progress has been made in the U.S. and around the world in just the past few centuries. Though a century or a few centuries may seem like an eternity, it is but a moment in mankind's history. Railroads were not operational until 1825. Electricity was not prevalent in most homes until the early 20th century. In my lifetime, the innovations of the internet and the smartphone changed the world profoundly to the point that teenagers today would feel alien without them. Major innovations make life better and humans inherently want better lives. So how does this relate to the stock market? Innovative companies, like the internet stocks of the late 1990s, grow their earnings rapidly and consistently, allowing investors to exploit these fundamental shifts and profit handsomely. Government Policy Another secular trend maker or breaker can be government policy and central bank policy. Argentina is an excellent example of how the government can impact economies and markets. Until 1930, Argentina was the economic jewel of Latin America. The country benefited from its abundant natural resources, such as fossil fuels, beef (considered the best in the world), and minerals (including gold, copper, and lithium). You may be surprised when I tell you that Argentina was one of the world's ten wealthiest countries per capita in the early 1900s, and Buenos Aires, Argentina's capital city, was dubbed "The Paris Latin America" due to its magnificent architecture. Unfortunately, the economic renaissance would not last. By the mid-1900s, Argentina adopted socialist policies, and government officials engaged in fiscal recklessness, leading to chronic hyperinflation and economic disasters. In late 2023, Argentina made a 180-degree turn and elected economist Javier Milei. Though Argentina is not out of the woods, Milei has delivered the country's first economic surplus in decades, and the Argentine stock market is up nearly 60%. The Argentina case study proves why investors should be cognizant of the government's impact on the economy and the stock market. Demographic Shifts Demographics refers to the statistical attributes of populations (such as age or income) used specifically to identify trends. No greater example exists of the impact of demographic shifts on markets than Japan. The Nikkei, Japan's stock market, topped on December 29th, 1989 due to an asset bubble. After years of prosperity, overvalued stocks came back to Earth. However, what would happen next was a bear market for the ages. Japan's stock market did not reach fresh all-time highs for more than three decades due to low economic growth, deflation, and most importantly, a population collapse. Secular Shifts are Like Cruise Ships These secular trends are resilient to temporary disruptions or minor market fluctuations, offering constant and lasting growth. A fantastic metaphor for investors to use when thinking of these megatrends is trying to turn a cruise ship. Secular trends, like cruise ships, cannot pivot at a moment's notice. Instead, these trends persist, making them particularly important for investors like you to identify, regardless of time frame or strategy. More . . . | ||||||||||||
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| Trend #1: China, a Monumental Policy Shift Like the Japan and Argentina examples, China's economy and stock market have languished for years amid anti-business policy and the COVID-19 pandemic. The iShares China LC ETF (FXI), a proxy for large-cap Chinese stocks, reached a high of $73 in 2007. By January 2024, it had fallen to as low as $20. Despite the negativity around China, the investing picture completely flipped in late September after the Chinese government announced a sweeping, larger-than-expected stimulus package and lower interest rates. Clearly, the government's agenda is to support the economy, inject liquidity into the system, and become more business friendly. FXI jumped 10% on the news, and trading volume swelled 399% above the 50-day average. The combination of insane demand and drastic policy change parallels past historical trend changes. Trend #2: Nuclear Will Power the AI Revolution OpenAI, the company behind the wildly popular ChatGPT chatbot, is among the fastest startups to reach the $150 billion valuation milestone. While ChatGPT and other large language models (LLMs) like Alphabet's (GOOGL) Gemini have attained early success, that success isn't without its challenges. Data centers, which are needed to "train" LLMs, require 10-50 times the power of a typical commercial space. As it is, U.S. power grid issues and frustrating outages have increased recently. To make matters worse, data center energy consumption is slated to compound by 10% over the next five years. Though growing energy needs are a headache for AI-related companies, it is an opportunity for utility and nuclear companies like Constellation Energy (CEG). In late September, CEG shares powered higher after Microsoft (MSFT), OpenAI's largest investor, inked a 20-year deal with the company to re-open the infamous "Three Mile Island" and provide energy derived from the nuclear plant. Pew Research shows that most Americans support more nuclear power in the U.S. and politicians on both sides of the aisle are warming up to it. The enormous demand, a high-profile investment, and widespread support are ingredients for a multi-year megatrend. Trend #3: Bitcoin's Moment Bitcoin is the top-performing asset since its inception in 2009. That said, trends can last longer than most investors anticipate, and Bitcoin will likely be no exception. Three dynamic changes in the Bitcoin industry will propel the next wave of the bull market:
Putting It All Together Megatrends and long-term waves can offer investors lucrative opportunities. In this article, we've touched on a few that savvy investors will likely key in on. And the good news is, our expert-led portfolio recommendation services cover a number of strategies, grounded in Zacks Rank fundamentals, that can lead you to the top stocks to take full advantage. Today, I'm pleased to offer you full 30-day, real-time access to every stock and ETF we're recommending as part of our celebrated Zacks Ultimate service. Don't miss your chance to see the real-time picks, including positive earnings surprises, emerging technology trends, aggressive growth, value, ETFs, dividends, options, blockchain trades, even short sell moves, and more. These portfolios closed 247 double and triple-digit gains this year alone. While not all our picks are winners, members saw recent gains of +113.4%, +200.3%, +263.2% and even +812.0%.¹ Your cost for all this is only $1, and there's not 1 cent of obligation to spend anything more. Free Bonus: You'll also receive the Zacks AI Total Package, which is a bundle of five Special Reports, each highlighting a unique way to target huge gains with little-known AI stocks. These companies that make AI possible could hand you the biggest profits in the weeks, months, and years ahead. Your opportunity ends at midnight Sunday, December 22. Gain Zacks Ultimate Access Now for Just $1 » All the Best,
Andrew is Zacks' technology stock strategist. His passion is making money on stocks along with education, where he aims to provide valuable insights from both a fundamental and technical perspective in his Technology Innovators portfolio. | ||||||||||||
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| ¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. Access grants you a comprehensive list of all open and closed trades. This free resource is being sent by Zacks.com. We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms of Service". https://www.zacks.com/terms_of_service Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The Zacks #1 Rank Performance covers the period beginning on January 1, 1988 through December 2, 2024. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank #1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance_disclosure for information about the performance numbers displayed above. Zacks Emails Zacks Investment Research |
Sabtu, 21 Desember 2024
3 Stock Trends to Ride in 2025 and Beyond
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