Six Promising Post-Recession Sectors

Most economists agree that we’ve now been in a recession for a year. So now the question is, what sectors of the economy are going to be the “ones to be in” when things turn upward.

Certain sectors will lead us out of this mess and you need to know which ones they are so that you can invest in stocks that will go up as the economy improves. This way you will get an “earlier start” than others in the recovery of your account balance which means you will get in before stock prices start going up.

Here are six sectors of the stock market that you should keep an eye on as the economy starts picking up:

Transportation

When a company feels that the economy is just about to come out of a slump, they order more products for the consumer to buy…Those products have to be “transported”. This is why transportation stocks pick up at the beginning of an economic recovery and sometimes even a bit before the recovery happens.

Technology

Another thing companies beef up on is technology. If you can do more work, more efficiently…then you can take in more profits with the same level of employees. Since employees are one of their biggest costs, they try to hold off on the hiring process until the recovery is underway.

Services

As the economy gets back rolling once again, consumers and corporations both use more services. This means they are once again willing to pay someone else for something they formerly did for themselves or felt they could do without at the time.

Commodities

Then later on as times improve, businesses and home owners want to expand their operations or homes and so that puts a demand upon the materials sector of the economy. This is where commodities shine. They start really kicking in the most towards the latter stages of a bull market in stocks.

Energy

Hence, the next category…energy. You will find that oil in particular really gets its “second wind” right at the latter stages of a bull market. The economy has expanded a lot and is more of a demand upon the energy supplies, thus causing the price to spike higher.

Financial

Right before an economic upturn, remember we said that businesses stock up on inventories? Well, these are typically financed on the front end and then paid off once the inventories are worked down. Thus this calls for the need for a wave of lending which helps the banks.

So what does this all mean to me? It means that as the economy starts turning around, you want to invest in market sectors that will benefit. Historically, sectors that have benefited include transportation, technology, service, commodities, energy and financial. You may want to own a “basket” of these through mutual funds or ETFs that focus on these sectors of the economy.

Comments

[BigOlDave:]

Sean,

Agree with your sector picks. It would have been nice to have 3-5 of your favorite tickers in each sector.

Zeronimo,

You are a pumper for synergeticstocks.com. What do they pay you to troll sites and make your meaningless comments? Gotta hate you guys for wasting readers’ time!

Dave

2008 Dec 17 12:53 PM

[myWealth.com:]

Good point,Dave.

Transports and Tech generally turn up first: IYT, SEA, XLK and IYW are ETFs to look at there. Pick one Trans and one Tech out of those.

Services will perk up next: IYC

then commodities: JJG, DBC

Energy (oil/nat. gas): USO, UNG

Financial (Banks): KBE, IYF

Hope that helps, man.

2008 Dec 17 04:24 PM

[bindlepete:]

Blind and Naive:

Will things get better, of course they will as we adjust to a lower level of lifestyle as measured by our growth infatuated economic measurements.

The question is, how long, until we turn a corner in our measurement of public welfare or utility? Where does this myopia come from that the classic forms of " economic " growth are meaningful to any one but the self serving economists?

As William Henry Locke Anderson ,a high powered economist, from Ann Arbor said " this field is a fun filled arena of speculation but science and honest predictive practice it is not". It was a disappointment for my old roommate who had spent most of his life in studying the problems but he found more important things to spend his time on before he died.

The economy coming back? For any thing beyond a shallow minority this means nothing.

2008 Dec 18 07:25 AM

[myWealth.com:]

You have to remember that the masses get it wrong every time. They don't see tops forming and they don't see bottoms coming either. So if you're waiting for a consensus before hopping into stocks, you will be way too late.

If Greenspan's 1% rates spurred a market bubble....wonder what Bernanke's 0% rates will do? He's printed more money, reduced rates, about to buy Treasuries, taken on positions in companies, etc.

So if you watch too much financial T.V., then it won't be seen. But for the independent thinkers/analysts and researchers out there....there will be a few that see it coming and that have been around long enough to see how these have played out throughout history.
www.mywealth.com/blog/

2008 Dec 19 12:49 PM