US tech stocks are in a bubble. It’s time to shop for growth elsewhere.
This commentary was posted recently by fund managers, research firms and market newsletter writers and was edited by Barron’s.
Advisors Richard Bernstein
October 29: Investors go short-sighted during bubbles. They believe that the universe of attractive investment opportunities is small and that growth can only be found in a few selected sectors. As we have repeatedly emphasized, it is precisely this narrow-mindedness that presents the opportunities as investors ignore the wide range of potential investments outside the bubble.
Today’s bubbles follow this precedent. Investors are squarely focused on technology, innovation, disruption, cryptocurrencies, and housing, but very little else. They seem to be in love with space vacations and electric vehicles, but ignore the urgent need to improve the logistics and electrical infrastructure of the United States.
Ironically, many stock markets around the world, which are not known as hotbeds of innovation and disruption, are outperforming
the index so far in 2021. We believe that most investors are completely unaware of the fundamentals supporting the outperformance of these markets.
âRichard A Bernstein and his team
When will the GDP increase?
THINK Economic and financial analysis
October 28: It is clear that the US economy entered a soft phase in the third quarter as the Delta variant of Covid spread across the country and led to increased caution among households. The sharp declines in restaurant reservations and travel were a prelude to today’s weak third quarter GDP reading. Fortunately, the number of Covid cases has fallen sharply since the peak in mid-September and we are seeing a rapid rebound in consumers’ willingness to go out and spend money.
We are confident that the fourth quarter will see much better growth despite concerns about the rising cost of living. The combination of a high demand for labor and a shortage of supply will keep incomes on the rise while households will have additional resources to weather this storm due to the fact that their wealth has increased further. of $ 26 trillion nationwide since the end of 2019.
Adding planned government spending on infrastructure and social policy, increasing corporate capital spending, restocking and returning foreign visitors in significant numbers means that we believe the economy can grow further. 4.5% next year.
âJames Knightley, Padhraic Garvey, Chris Turner
October 28: Florida’s strong economic growth is expected to continue for much of the decade. After rising 5.9% this year, Florida’s real GDP growth is expected to outpace that of the country over the next two years, reflecting stronger population growth and the influx of higher value-added jobs in the fields of technology, life sciences and specialized finance. Employers are expected to create 273,000 jobs in 2022 and 300,000 jobs in 2023. Florida’s unemployment rate is expected to average 4.2% in 2022, but end the year below 4%. Strong employment and income growth is expected to attract more job seekers to the state, which will also continue to attract large numbers of retirees, fueling home construction and commercial construction.
We expect Georgia’s economy to gain momentum this fall and into 2022. After growing 5.8% this year, Georgia’s real GDP growth is expected to outpace that of the country over the next two years. years, reflecting stronger population growth and the influx of higher value-added products. jobs in technology and life sciences. Manufacturing remains important in the state, particularly in the automotive, aerospace, flooring and poultry processing industries. The Port of Savannah is another key growth engine and continues to handle record volumes of container traffic, supporting strong growth in transportation and warehousing in Savannah and Atlanta. The port is working to add more container storage space amid a shortage of available warehouse space in the surrounding area, despite the breakneck development of the past decade.
âMark Vitner, Charlie Dougherty, Nicole Cervi
Housing market: still strong
October 26: Total new home sales reached an annualized rate of 800,000 units in September, beating the consensus forecast of 759,000 units and our forecast of 787,000 units, the highest forecast of any survey we participate in. At the same time, previous sales estimates for the June-August period have been revised downward, with an average monthly sales rate of 699,000 for the three-month period compared to previous estimates of 718,000 units. The downward revision in August sales was particularly severe, with sales now reported at 702,000 units compared to the initial estimate of 740,000 units (annual rates). More often than not in recent months, revisions have been downward, suggesting not to get too attached to the initial September sales estimate.
Even outside of potential revisions, September’s sales figure is lower than it appears. Sales in the South were much stronger than expected, as suggested by September’s data on permits and starts for single-family dwellings, which were hit by Hurricane Ida. At the same time, sales in the Midwestern and Western regions were well below what September’s construction data implied. Clearly, the new housing market is not functioning normally after months of builders operating under self-imposed sales caps, while constraints on material supply weighed on housing starts and completions. Still, while there are signs that demand has weakened a bit from early 2021, that doesn’t mean demand has dried up, and builders are still struggling with significant arrears of commands not executed.
While the prospect of higher mortgage interest rates looms in the market, we expect sales to increase in the coming months. But we expect the pace of increased sales to remain somewhat uneven, largely due to continuing constraints on the supply side.
âRichard F. Moody
Embrace dividend growth
Outlook and comments
Washington Passage Advisors
October 26: We believe that companies with a track record of increasing dividends are a good place to start in the search for fundamentally strong and growing companies. Steady dividend growth often follows consistent profitability and shareholder-centered management. A dividend growth outlook goes beyond current yield and takes into account other factors, such as quality, growth, risk and value. A history of dividend increases can be seen as a tangible signal by the management of a company that they are both willing and able to increase a payout to shareholders. This commitment suggests quality fundamentals today, with an expectation of continuous improvement in the future. In short, it suggests a consistently high level of profitability with relatively low leverage.
A recent study by Ned Davis Research shows that yield was higher and volatility lower among companies that increased their dividends compared to ordinary dividend payers (who may or may not have increased the dividend), companies that did not pay dividends. no dividends, and in particular dividend cutters for the period January 1973 to December 2020. As we have shown in other research notes, increasing dividend strategies outperform high dividend strategies because the latter work. effectively as bond substitutes.
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