A seesaw (also known as a teeter-totter or teeterboard) is a long, narrow board supported by a single pivot point, most commonly located at the midpoint between both ends; as one end goes up, the other goes down.
Seesaw in 1792 painting by Francisco de Goya
A seesaw (also known as a teeter-totter or teeterboard) is a long, narrow board supported by a single pivot point, most commonly located at the midpoint between both ends; as one end goes up, the other goes down.
The historical trend, particularly in the context of moving from a recession to a recovery phase in the economic cycle can offer some insights for potential sector performance over the next decade. We are at a pivot point, between the historical trend and world macro forces of the future.
Let's speculate on what teeters ahead for 2024 to 2034.
image credit: Bloomberg
1. **Bitcoin (BTC):** Historically volatile with periods of significant gains. Given its performance in the dataset, it may continue to be a high-risk, high-reward asset. Its role may evolve as the cryptocurrency market matures.
2. **Utilities (Util):** Often perform well during recessions due to their stable demand and dividends. As the economy moves into recovery, they may not outperform growth-oriented sectors but can provide stability.
3. **Manufacturing (Manf):** Typically benefits from a recovery as demand for goods increases. Infrastructure and transportation sub-sectors could see growth with increased economic activity and potential stimulus measures.
4. **Consumer Discretionary (Disc) and Staples (Stpl):** Discretionary may rebound strongly in a recovery as consumer spending increases. Staples tend to be more resilient during recessions but grow at a steadier, more modest rate during recoveries.
5. **Energy (Energy):** Traditional energy sources may see increased demand in a recovery. However, the long-term trend is likely to favor green energy technologies.
6. **Communications (Comm):** The sector may continue to grow with the increasing importance of digital connectivity and services.
7. **Data:** As technology advances, sectors like cloud computing, AI, and tech are expected to grow, potentially outperforming many traditional sectors.
8. **Healthcare (Health):** Typically less cyclical and may continue to grow due to demographic trends and innovation.
9. **Real Estate Investment Trusts (REITs):** May benefit from economic recovery, especially if interest rates stabilize or fall, improving financing costs.
10. **Materials (Mat):** Likely to benefit in the early to mid-recovery phase as construction and manufacturing demand rises.
Since we are planning to 2034, we need to consider structural changes in the economy, technological advancements, regulatory environments, demographic shifts, and geopolitical factors that could influence these sectors differently in the future than in the past. Additionally, the increasing importance of sustainability and ESG (Environmental, Social, and Governance) criteria in investment decisions may favor sectors that align well with these values.
We will explore these considerations in future blogs, for now we will just keep skating to where we think and hope the puck will be, and live with the results.
Given these considerations, diversification remains key, and while historical trends are informative, they should only be one of many tools in our decision-making process. Monitoring economic indicators, sector-specific news, and maintaining flexibility to adapt to unexpected changes will be essential in positioning our SS+ portfolio for the long term.
*Happy investing tee-totter-ers!