Everything seems to indicate that this year will not be very favorable for equity markets, especially in certain sectors that show a very weak technical outlook . It will be the time to analyze our investment portfolio and make changes to it with the sole objective of not getting caught in bear markets that could cause small and medium-sized investors to lose a lot of money over the next twelve months. The common denominator in their actions will be caution above other technical considerations.
Financial reports also offer little optimism regarding what this complicated stock market year may hold. In this regard, the International Monetary Fund (IMF) has just published its latest World Economic Outlook (WEO), which projects continued global growth for 2019 at the same rate of 3,7% as last year. Specifically for Spain, the IMF has lowered its growth forecast for the Spanish economy to 2,2% in 2019. That is, five-tenths of a percentage point lower than the forecast for 2018.
Furthermore, the report highlights that global growth is exceeding that achieved in any of the years between 2012 and 2016, at a time when many economies have reached or are approaching full employment and when previous fears of deflation have dissipated. Therefore, economic policymakers still have an excellent opportunity to strengthen resilience and implement reforms that bolster growth.
Sectors: business opportunities
The reviews also vary by geographic region, and include major Latin American economies (Argentina, Brazil, and Mexico), emerging European economies (Turkey), South Asia (India), East Asia (Indonesia and Malaysia), the Middle East (Iran), and Africa (South Africa). All these variables should be reflected in the stocks traded on equity markets. Undoubtedly, some stocks will perform better than others, and that's where you should focus your investments to maximize your returns. Because the risks this year will be significantly higher, and they could certainly cause you more than a few problems from now on.
To help you channel your investments correctly this year, we'll point out the stock market sectors that are poised for the best performance. These will be a few specific sectors where the greatest business opportunities will be concentrated in this new trading period. This goes beyond any technical aspects they may have generated in recent months. Ultimately, the goal is to choose stocks with the highest potential for appreciation . Therefore, the recommendations are limited, and a very detailed analysis will be necessary.
Shelter and highly stable sectors
Stock market segments should be chosen that are not driven by volatility, and even less so by debt in their corporate accounts. From this perspective, the most stable and secure stocks are best positioned to perform in the challenging year ahead. One such segment is represented by electricity companies , which, in addition to offering this important characteristic, provide a very attractive dividend yield. With a fixed and guaranteed annual interest rate of around 5%, this is certainly higher than that offered by all fixed-income products, which barely exceed 1%.
The food sector should certainly be another staple in this unique pool of investors looking for opportunities in the equity markets. It's no coincidence that these sectors tend to outperform others during periods of greater instability in the financial markets. However, one of the main obstacles to fulfilling this desire is the scarcity of stock market offerings in Spain. You'll have no choice but to turn to international markets if you want a wider range of options in this predominantly conservative sector.
The sun and beach will continue to rise
Tourism activity in Spain will grow in 2019 for the first time in ten years, lagging behind the overall economy due to slower growth in key source markets and the recovery of competing destinations in the Mediterranean, according to the Alliance for Tourism Excellence, Exceltur. However, Exceltur has revised its 2019 tourism growth forecast for Spain downward to 2,6%, from the 3,3% it predicted in April. This figure is one-tenth of a percentage point below the 2,7% growth rate analysts are projecting for the Spanish economy.
In any case, the tourism sector could be one of the best performers in the equity markets. It's no coincidence that it's a rapidly expanding industry with better figures than other major sectors on the stock exchange. Given this sectoral reality, companies like Sol Meliá, NH Hoteles, and Amadeus represent excellent alternatives for growing personal wealth during this period that has just begun. It's worth remembering that a financial asset based on sun and beach tourism is very attractive for stock market investment.
Banking is underweight
In any case, there is no doubt that one of the big surprises this year may come from the banking groups. This is explained by the fact that a very strong punishment has revived during 2018 and it may be time to recover in the price of its shares by offering very relevant discounts on the target price of these financial companies. However, the risk is still higher than in other sectors because they maintain the same problem as before. With structural deficiencies that can cause them to fall into their positions.
On the other hand, a good part of these listed companies have left around 20% of their stock market valuation in the past year. A harsh and perhaps excessive punishment by investors that can lead to significant rebounds in its price from now on. They are securities that can be very interesting to hire if they are aimed at short-term operations. Co a potential for revaluation more than important due to the discounts that are quoted at the moment.
Another possible surprise: luxury
It also indicates that the listed companies that represent the luxury sector can also perform better in the stock markets. Traditionally it has always happened this way and especially when the first signs of weakness appear in the financial markets. In this sense, it cannot be forgotten that the luxury sector is anti-cyclical and can benefit from this trend in purchases. Beyond the technical analysis and maybe even the fundamental one.
If you wish to focus your attention on this unique sector, you'll have no choice but to look to the stock exchanges of the old continent, where these international stocks are primarily listed. In some cases, they offer more than enough potential for appreciation to entice you to start trading in this equity sector. One of their most striking characteristics is their high volatility in terms of share price, and they can generate substantial profits in a very short period. However, this comes at the cost of assuming a series of risks that could negatively impact your investment strategy.
Airlines
In this particular case, there are two completely contradictory trends. On the one hand, they could perform very well this year due to their clear link with tourism , where passenger traffic shows consistently positive upward trends. This could make them a very important part of your new investment portfolio, given their undeniable appeal to investors.
However, on the other hand, the main drag on its stock price is the high price of oil , which is currently above $80 a barrel, preventing it from continuing to rise in the new year. This would translate into a weakening of its share price. Indeed, the relationship is very direct, as higher crude oil prices tend to negatively impact share prices in the financial markets. Other considerations will be discussed in separate articles.
In any case, it will be another of the sectors to consider during the next twelve months. At least to carry out very fast operations in which a strong capital gain can be generated. And in any case, as another of the great surprises that 2019 can bring. As you will see, business proposals will not be lacking during these days and now it only remains for these predictions to be fulfilled in the stock market that can be very useful for the next few months.