Dec. 28, 2018
Health care, consumer discretionary and real estate were among the best performing sectors in 2018, and at least two of these sectors should rise in early 2019.
Sam Stovall, chief investment strategist at CFRA Research in New York, says the beginning of the year can be good for the stock market. Gains in May and October are less, up 1.4 percent on average 64 percent of the time, and defensive sectors like health care and consumer staples sectors hold up best, he says. “That sort of justifies the old adage that says when the going gets tough, the tough go eating, smoking and drinking,” Stovall says.
Here are nine sectors to watch.
1. Financials. James Hickey, chief investment strategist at HD Vest in Irving, Texas, says in the financial sector, he likes business development companies. BDCs invest in small- and medium-size companies with preferred status or direct equity investments.
Even though the Federal Reserve is raising interest rates, Hickey says he expects these businesses to do well in 2019. BDC loans are usually prime plus or Libor plus, the prevailing interest rate.
“If the Fed raises rates, it just means they make more money so that's a very good place to be,” he says.
The federal government also just expanded the leverage BDCs can use to make loans, which means they have more capital to deploy.
2. Health care. With uncertainty in the markets, Olivia Engel, chief investment officer of active quantitative strategies at State Street Global Advisors, says investors should look at defensive sectors, such as health care. Over the last 10 years, health care has done well, in part because of demographics with an aging population, she says.
Even though it’s traditionally considered a defensive sector, health care also benefits from higher earnings growth. Health care is 2018’s top performing sector. To find reasonably priced companies, Engel recommends looking in the “more boring parts of health care” rather than the high-growth areas. – Debbie Carlson
https://money.usnews.com/investing/stock-market-news/slideshows/9-sectors-that-investors-should-watch-in-2019?src=usn_invested_nl
