This Sector Belongs In Your Forever Portfolio
Dear Wall Street Daily Reader,
A change in market leadership is underway, as investors around the world freak out about the potential for rising interest rates.
More specifically, you’ve probably seen countless headlines in recent weeks talking about the surge in financial and energy stocks at the expense of (gasp) my beloved tech stocks.
As these trends gain momentum, one reader asked if we should go “all-in” on energy and financials now.
My response? Not just “No,” but “Hell, no!”
Never Early, Always Late
Over the years, I’ve learned that following headlines often leads to heartache.
Constantly trying to chase performance by moving your capital in and out of the top-performing and headline-grabbing sectors is a recipe for disaster.
Remember, the news cycle is notoriously short and late.
Headlines reflect events in recent history (i.e., the past). And as we all know, past performance is no guarantee of future results.
In other words, if you’re relying on headlines to dictate portfolio moves, you’re always going to be late to the game, and you’re always going to be “paying up” to get positioned.
What’s worse, within a matter of days or weeks, you’re going to be tempted to move onto the next trend that’s attracting fresh headlines, and then you’ll pay up again.
Does that mean we should ignore all burgeoning trends, including the ones taking place in the financial and energy sectors?
Of course not!
Putting some money into financials and energy stocks right now makes perfect sense, as they’ll benefit during times of economic expansion.
And as I’ve shared recently, there’s so much pent-up economic demand right now, we’re overdue for a major GDP surge.
Sure enough, economists at major investment banks this week started predicting GDP growth will hit 8% this year… eight freaking percent!
Unless you live in China, a number that big hasn’t happened in decades. But again, don’t get caught up in all the excitement.
Go ahead and put some money into energy and financial stocks as the global economy comes back online. Just don’t go plowing all your money into these sectors.
Or put more simply, just because a new trend appears to be emerging doesn’t mean we need to abandon every other trend.
After all, this isn’t a zero-sum game. If one sector rises, it doesn’t mean all others must fall.Truth be told, some sectors are guaranteed to keep going higher — well, forever.
For example, semiconductors, which I’ve told you about many, many times before.
And another no-brainer “forever” trend is cybersecurity. And we just got fresh proof why…
In recent weeks, a hacker collective successfully accessed 150,000 surveillance cameras in hospitals, police departments, prisons, schools, and companies including Tesla (TSLA).
Their motive? As one hacker claiming credit told Bloomberg, “Lots of curiosity, fighting for freedom of information and against intellectual property, a huge dose of anti-capitalism, a hint of anarchism — and it’s also just too much fun not to do it.”
In other words, this was a crime of sport.
Now imagine the implications of such a cyberattack being undertaken by a major world power. Talk about the potential to gain a significant edge.
That’s the thing about the cybersecurity sector. New threats emerge every day — at the same time the attack area is growing every day.
What’s more, the world’s never going to stop producing more data. And each new bit and byte becomes another potential vulnerability.
No wonder the White House pegged cybersecurity as “one of the most serious economic and national security challenges we face as a nation.” Possibly ever, I’d add.
So forget about getting caught up in the hyped-up trends of the day. Instead, focus on adding forever growth trends to your portfolio.
Pick one — any one — and plan on keeping it in your portfolio for… well, forever.
Ahead of the tape,
Editor and Founder, Trend Trader Daily