Whatever their individual strategy might be, leading stock market analysts can all agree that the road ahead will be challenging. With potential threats that include recession, slowing corporate profits, continued reverberations from the financial services melt-down, rising commodity prices and –on the international front—continued major geopolitical turmoil, the stock markets are not for the faint-of-heart. But, as any smart investor knows, tumultuous times always generate unique investment opportunities alongside the angst. In times of great uncertainty, nothing pays off quite like patience allied to a calm, level-headed approach to investment strategy. All is not doom and gloom. Here is a synopsis of commentary and observations from leading commentators on the outlook for 2008.
- First, the U.S. economy may be sluggish, but world-wide, the economy is expected to grow at a respectable rate of at least 4.5 percent, which indicates that there are some exciting investment opportunities in growth markets. In considering overseas markets, remember that a weaker dollar continues to help U.S. companies make further inroads in capturing market share overseas, where American goods have become cheaper.
- The recent sell-off in the stock market has created special buying opportunities for investors nearing retirement who can best benefit from the “bargains” currently available among blue-chip stocks—equities that have taken such a beating that they are offering yields not seen since the end of the last bear market. Additionally, many stocks that have always paid solid dividends are also very attractively priced as a result of the general decline in stock prices. The time has never been better for boomers –especially those who are ready to build a diversified retirement portfolio of blue chips and corporations with solid dividend performance –to consult with their financial planner.
- For those whose retirement is further away, investment strategists favor a variety of sectors and international markets that they believe offer value and potential profits. Here are some of their favorites:
- Agriculture—Industry analysts expect crop prices to continue to rise, spurred by demand from emerging countries. Apart from major agriculture companies, analysts also expect U.S. manufacturers of agricultural equipment—tractors, combines, etc.—to benefit, too.
- Large U.S. conglomerates—Large companies began to outperform mid- and small-cap stocks last year, but investors have yet to “catch up” with this trend, and shift their money from smaller companies. As a result, many large U.S. companies still remain attractively priced, and as a further plus, large companies (with diverse products and customers world-wide) are better situated to weather uncertain economic times.
- Central Europe—China and Asia may still garner most coverage in the international business press, but Central Europe is seeing major economic growth and, as a result, increased disposable income for millions of people. Apart from U.S. companies offering consumer products in this market, analysts are also evaluating financial institutions and banks based in the region.
In 2008, we can expect volatility, surprises, and occasional jitters— just as we saw last year. Volatility is an inescapable part of the investment world. Without it there would be no opportunity for gains or profits. Remember it’s not the upbeat markets that make you rich. It’s ones like this where sound strategy, careful analysis and patience are needed for the long haul.