The universe of investment is full of market ups and downs. Every year, a massive amount of money is invested in various investment options. While the investment goals of various investors vary, they invest with a common investment objective, i.e. to get best returns on investment.
There are times when we learn from our experiences. During such times, the theoretical knowledge takes a back seat. The best way to learn investment is by investing. The investors are always on a lookout to come across the best investment avenues. If you are on a quest to find the best investment advice, you have come to the right place.
To help the investors sort out their investment options, here is investment advice from fortune’s investment experts. Let’s read it:
American companies and Tax Reforms
American companies sell their products across the globe. They are stacking a lot of revenue overseas. In case the tax reform changes and lots of cash come back to the U.S., it’s unlikely to increase capital investments.
Any one-time tax reform change or cash change won’t increase the capital investments. In recent years, the access to funds has been easy. A one-time change could potentially materialize more through buybacks.
If tax reform/ tax reductions are changed on a permanent basis, dividends could be higher even without firms having to modify their CAPs, i.e. capital allocation policies.
While there are some positives aspects of tax policy, immigration policy is a little worrisome. As per the data, 51 percent of tech companies with more than a billion USD in market CAP were founded by at least 1 immigrant founder.
If the Government limits immigration, it will have an unfortunate impact on the economy’s innovation.
Big Tax Cut and Small Firms
Historically speaking, small firms are benefitted by big tax-cut benefits.
A company striving in a commoditized industry will get a windfall in terms of a lower tax rate. It may pass that on to their customers, which will reflect in lower prices. The marginal benefit gets pared away when natural competitive forces come to action.
Are Bull Markets Overvalued?
Back in 1999, the valuations were getting high. The bull market was at its peak. It was driving best returns of the S&P 500.
Regardless of the valuations being undervalued or overvalued, valuations are not that great market-timing model.
The Movement of Technology
A few years down the line, the automotive industry will be revamped, thanks to three buzzing trends – on demand, electrification, & soon to be added to the list – autonomy. The complete autonomy will rule the future of the automotive industry. In the future, people won’t need to get their driver’s license. Driving a car would be more of a hobby. It will affect the value of shares of automobile companies.
The Fed Reserve and High-Interest Rates
The Fed indicated that it will continue to increase the rate of interest. It’s a relief to be in an economy where interest rates are rising.
The utility sector has performed at par with the S&P 500, ever since the interest rates were hiked for the first time back in the year 2015. If the investors are investing in the right utilities, (not to be confused with high-yielding companies) and the cash flow is supporting their cash returns back to shareholders, the rising interest rate is a good thing. It’s good as long as it’s a reflection of the prudent economy.
Is barrel range 55 USD to 65 USD the new normal for Oil?
Oil producing companies such as Venezuela and Saudi Arabia have been involved the events that 5 or 6 years back would have hiked oil. Quite surprisingly, the prices have been relatively stable. It’s because 5 years later, the oil prices would be m uch lower as compared to today.
Now, one can drill a hole and start oil production in a span of 3 months. The key players have taken that into notice. Now, they have responded by lowering down their costs. They have brought new production offshore at 40 USD to 50 USD. Earlier, the range was set at 70 USD- 80 USD to earn decent returns.
As mentioned above, the future will be dominated by electric vehicles and automatic vehicles. In the long run, the demand for oil will decline. It means we will have more supply at a lower cost. Investors having a long-term investment horizon need to underweight energy in the next 5 years – 10 years.
The greatest Opportunity and the Greatest Risk
Tax policy and immigration policy, international political stability needs to be stabilized. It’s because the biggest risk lies in the geopolitical situation. It’s safe to say that the fundamentals of our businesses and economy and are quite strong.
As for opportunity, technology is the biggest sector that will grow economically. While the technology sector is driven by software, the future of software lies in cloud computing.
When it comes to dividend stocks, it is quite difficult to find direct investments in the technology sector. The technology sector’s revenue across all the industries is profitable. It suggests that the cash flow will be higher, and more cash will be returned to the investors.
“Change is the only constant,” They say. Basically, a positive change in tax reforms can increase the returns on investment up to 15 percent. The increase in ROI is applicable across various investment options. The future of investment market is technology-driven. With the change in driving force of the economy, investment preference is bound to change. This will work in the favor of tech-oriented shares.