The new year brings an opportunity to reassess growth-oriented investments and take advantage of new opportunities. Looking ahead to possible policy changes will create a sustainable portfolio in a volatile market. It is also important to understand the needs of the younger millennial investors and their increased attention to social impact investing.
Seven of Wall Street’s top strategists share their outlook for the stock market in the coming year. Some investors argue the election outcome has changed the game for the better, however, caution is warranted as we wait to see how policy changes are accepted by Congress. The unexpected is becoming the norm and according to Michael Sonnenfeldt, there is no longer “safety in safety.” Traditional assets are no longer considered a safe option for predictable cash flow, dividends or distributions. Possible fiscal stimulus initiatives may improve the outlook for investors in the stock market, however balanced and fixed-income investors may find total returns difficult.
With the new year nearing, it is a good time to re-assess portfolio diversification and make changes as needed. Brian Feroldi, author of the article, looks at three potential stocks for 2017: CVS Health, Paycom Software, and Illumina. Despite a down year for CVS in 2016, potential growth lies in the continued rollout of MinuteClinics and a growing presence in assisted-living and long-term-care facilities. With around 10,000 baby boomers retiring daily, demand for pharmacy services is on the rise. Paycom is an emerging leader in cloud computing with a focus on payroll processing and other HR functions. For small and medium-sized businesses finding a technology that consolidates these functions in one easy-to-use package has gained in popularity. Illumina has made large advances over the past decade in genome sequencing which has major implications in disease management and prevention. With healthcare a major concern for an aging population, there is large potential growth for a company like Illumina if they remain market leaders.
Real estate is a good way to diversify a portfolio, especially in a volatile market. Industrial, multi-family, retail, and medical office investments are four popular sectors of real estate to explore. Industrial real estate has seen a significant growth with the rise of e-commerce and the need for warehouse space to support online fulfillment business models. With millennials owning homes less than previous generations and multiple generations sharing a home, it is not surprising multi-family homes are a hot market. If raising enough capital to invest in a solo project in not feasible, real estate crowdfunding offers projects for any kind of investor. It allows investors to partially fund projects of interest and usually offers higher returns and lower fees than traditional investment classes.
Social impact investing has developed into “a potentially powerful philanthropic force in recent years.” Funds include private equity, venture capital and working lines of credit that create pools of capital to provide market-rate and below-market-rate investments. Millennials increasingly make investment decisions based on the company’s positive contributions to society. As competition to participate in social impact funds increases among entrepreneurs and Wall Street, crowdfunding is expected to open the door to more investors.
With the stock market going through a volatile phase, investors should have a game plan to handle their investments for the coming year. It is important to control nerves and emotions when looking at short-term changes in the market. Proper research helps ensure long-term financial goals based on the investment horizon and personal risk-taking ability. Creating a diversified portfolio and rebalancing once a year helps maintain asset allocation and will minimize the effect of short-term volatility in the market.
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