Looking to invest in the stock market? According to US News, these are the 9 stock sectors expected to gain this year.
Top Stock Sectors to Invest in This Year
The financial sector is one of the stock sectors that financial experts expect to grow this year. Banks, real estate firms, insurance companies, and investment funds make up this sector.
Generally, the majority of the revenues that this sector generates comes from mortgages and loans that earn their value as interest rates rise.
Financial experts expect the Federal Reserve to raise interest rates. If that happens, then it means that businesses in this sector only stand to earn more money.
Healthcare is also one of the top stock sectors expected to grow this year. Biotechnology companies, medical device manufacturers, and hospital management firms are some of the businesses that make up this sector.
Frequently deemed one of the best sectors to invest in, healthcare is a sector classified as both a defensive play and a growth opportunity because medical aid is something that people will always require.
In fact, it has performed well over the past 10 years. It is also the top performing sector of 2018.
Defensive Sector Definition: A defensive sector is a stock sector composed of companies that generally have a stable set of income and revenues during both economic downturns and upturns.
Industrials is generally seen as yet another defensive sector. It consists of machinery, fabrication, manufacturing, and other construction companies.
The continuous demand for building construction and other manufactured products drives the growth of this industry. This is why the industrials sector has lots of opportunities for investors.
Given the current volatility of the market, financial experts recommend investing less in natural resource companies and more on the waste management side of the sector. While less glamorous, they provide environmental services, recycling centers, and pollution control that are central in today’s landscape.
Having been robust over the past few years, technology is one of the best stock sectors expected to truly perform this year. It includes companies engaged in manufacturing electronics, developing software and other information technology firms.
Former investment favorites, such as Apple, may not be performing at their best in recent weeks. This, however, does not mean that investors should just ignore the technology sector, especially since it still remains a generally well-performing sector that encompasses a wide scope of companies.
Other companies in the sector, such as credit card processors or payroll providers, are still in the competition. They continue to grow steadily and could be great alternative options to traditional companies.
5. Consumer Discretionary
The consumer discretionary sector consists of media companies, apparel companies, consumer service providers and retailers. It is one of the top stock sectors that financial analysts expect to gain this year.
These companies generally benefit from a growing economic condition as the spending of consumers accelerate.
Because of the low unemployment and high consumer confidence that seems to be prevalent today, experts feel that the consumer discretionary sector will hold up. The growth of wages should also help support the sector.
When investing in the consumer discretionary sector, the most common strategy investors implement is to invest in companies that have found their way around the so-called “Amazon effect.” These are companies that have devised a way of competing with the online retailer giant.
The energy sector includes companies engaged in the production and exploration of oil and gas. It also consists of businesses in refineries, power firms, and other similar operations.
In general, the income of these companies is closely affected by the prices of oil, natural gas, and similar commodities. Though not one of the top sectors expected to gain this year, investors often still opt to have a certain level of exposure to it.
Currently, the balance between supply and demand in the global energy market is relatively fair.
All the same, the energy sector—particularly the companies engaged in exploration and production—is one that continues to show growth. With their efficient operations, these companies are ones that generate strong cash flow and dividend growth.
The materials sector is a generally volatile market, especially since these companies usually appear at the start of the supply chain. A few changes in the business cycle of companies they do business with can easily affect businesses in this sector.
This sector includes companies engaged in the discovery and development of raw materials. This includes chemicals, forestry, and mining companies.
Though the materials sector is one of the stock sectors that has recently taken a hit, value investors still find it worth looking into.
Threats of a US-China trade war along with other economic factors caused the decline of this sector. However, carefully studying the price patterns for certain firms in this sector should give one a list of interesting choices for investments.
Wireless providers, internet service providers, satellite companies, and cable companies are some of the businesses that make up the telecommunications sector. These companies generally drive their income from the recurring revenue from consumers.
Because of rising interest rates, investors often look into stocks of firms with lower debt and not necessarily the stocks with high price-earnings ratios. Traditional telecommunications companies that are well-positioned and conservatively-managed are some of the options that often provide an investor some good revenue.
Aerospace, which is a subsector of industrials, is also one of the stock sectors financial analyst expect to perform well this year. Prices for this subsector have recently gone up, likely because of the jump in US military spending.
The aerospace subsector often does well in late economic cycles. Investing in defense stocks and in the suppliers to the industry is a common strategy investors use when playing this market.
Knowing how to invest in the stock market with low risk means understanding the market. It entails learning about the different stock sectors and the factors that affect their movements.
Are there other stock sectors we may have missed? Share them with us in the comments section below!