The Boom Ahead – 5 Trends to Watch

It’s 2013 so what’s next for your portfolio?

Cheap EnergyAt Preferred Financial Strategies it’s that time of year where we are getting courted by every money manager out there, or so it seems. As part of our due diligence process we are constantly researching, listening and exploring.  

Whether it’s the investment wholesaler, the Wall Street big wig or the latest boutique third-party investment manager, they all have a story to tell. One thing that may be different this time around is that there are a few consistent trends or common threads that we have been able to identify.

 The word on the street:

1.     A moderately bullish outlook.

Determine an appropriate risk tolerance and then get in and stay in. Avoid following the heard and media noise. They tend to sensationalize everything in the name of ratings. Don’t be swayed. It’s not timing the market that builds wealth it is time in the market.

2.     Take advantage of long-term leverage.

It’s a great time to be a borrower, not a lender. Don’t be in such a hurry to pay off that mortgage. With rates at historical lows it’s a good time to utilize leverage.  Use someone else’s money while yours is working hard for you.             

3.     Expect the unexpected.

You have probably heard that moderation is the key in most things. This is also true in your portfolio. Don’t be afraid of the market but don’t jump in with both feet. A balanced or moderate allocation is appropriate for most people.  SLOG is the name of the game, slow growth that is.  Plan on continued volatility but don’t react emotionally to it.  We would expect to see a short-term retraction when there has been a consistent up trend however indications point to a positive overall trend in the market.

4.     Cheap energy.

 Consider a tilt in your equity portfolio that includes exposure to materials and industrials. These sectors have historically emerged as leaders coming out of a recession.  Cheap energy along with rising wages in Asia is fueling a growth spurt for US chemical manufacturers. Manufacturing may be the next comeback story. “Made in America” may be the next big thing.  It helps that there is pent-up demand and company coffers heavy with cash.  Some experts are saying that we could be energy independent in 5 years. This means opportunities in natural resource companies and energy infrastructure.

Location, Location, Location. Some things never change.  The long-suffering real estate market is also playing a factor in this manufacturing surge.  Manufacturers are scouting for more efficient, more cost-effective and more strategically located facilities. Locations with a diverse, educated work force are poised to take advantage of this. “Re-shoring” is today’s buzz word.  Certainly we are seeing some regional booms taking place among the surge in natural gas production. This bodes well for those markets as well as the resulting surge in service industries that soon follow.

5.     Maintain a global perspective.

Now might be a good time to take another look at emerging markets as a small slice of your international equity pie. Despite the weariness of the European brand market and the austerity fatigue plaguing places like Greece and Spain there are pockets of opportunity that should respond favorably to a SLOGGING global economy. In emerging markets you typically see a young workforce with growing income. This is what you are seeing in currently in countries such as Brazil, India and Indonesia.

IMarket Watchert’s time to take stock of your investment portfolio. Take time to talk with your financial advisor.

We are not suggesting you start attempting to pick stocks, far from it. We are big fans of group think and using a team approach. If you are not working with a trusted advisor give us a call at Preferred Financial Strategies. We think you will be glad you did.

 Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Sector investing may involve a greater degree of risk than invesmtnes with broader diversification. International investing involves special risks including greater economic and political instability, as well as currency fluctuation risks, which may be even greater in emerging markets. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.

About Sara Seasholtz

Sara Seasholtz, CFP®, was voted one of "50 Most Influential Women in Charlotte" by The Mecklenburg Times in 2011, and has assisted her clients with their financial planning needs for over 40 years. Have a financial question? ASK SARA!


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