Through the end of September, the S&P 500 Index was up almost 19% in 2019. That's the index's best nine-month start to a year since Bill Clinton occupied the White House. Yes, the job market is strong and consumers are still spending. But other than that, there isn't much in the way of hard data to justify higher equity values. If anything, the facts suggest a flat stock market at best. It is widely believed that the stock market is a leading indicator of future economic growth. If so, then's something's wrong. According to the Federal Reserve, gross domestic product (GDP) is expected to grow by only 2% next year. That's better than no growth at all. But it's highly discordant with the stock market's rapid rise over the past three quarters. If the Fed is correct, a stock market correction within the next 12 months would seem all but assured. But what if the stock market is trying to tell us something else? Maybe there is a new wave of economic growth around the corner, but we can't quite see it yet. By the end of this year, there will be more millennials than baby boomers. This changing of the guard brings with it enormous societal and economic implications. The first generation raised in the age of the Internet is now the largest consumer segment in the United States. As a parent of two millennials, I know this much. They are constantly connected to the Internet, and they value convenience. And for that, they (and the rest of their cohort) will need 5G technology. Also Read: 5G: The Fight for the Future Picking Winners When a new technology is rapidly evolving, it can be difficult to predict which company in that sector will emerge as the ultimate winner. For example, Apple (NSDQ: AAPL) is now the dominant player in the smartphone market even though Blackberry (NYSE: BB) pioneered that technology. Had you bought stock only in Blackberry (formerly Research in Motion) in 2008 when it was trading near $150, you would have lost 97% of your money by now. However, had you bought AAPL it would now be worth roughly 20 times what you paid for it! That means a $10,000 investment in Blackberry at that time would now be worth only $330, while the same amount invested in Apple would be worth approximately $200,000. Had you bought both to hedge your bet, your $20,000 total investment would now be worth 10 times that amount. |
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