The asset/debt boom and bust cycle that began in 2003 and culminated with the housing market collapse and financial meltdown in 2008 led to the worst economic downturn since the 1930’s. Not surprisingly, a recovery in housing has been seen by many as key to renewed economic growth. But while a renewed housing-driven cyclical upturn is at risk from rising Treasury/mortgage rates (reflecting outsized government borrowing) and continued tight credit, business investment in new technologies constitutes a healthy shift to sustainable secular growth.
Our secular outlook favors high tech stocks - which benefit from growing demand in emerging markets and are less vulnerable to current cyclical risks.* (See our previous features – Gauging Secular Trends, Shifting Leadership and High Tech Revisited).
*Yoav Benari, “Optimal Asset Mix and its Link to Changing Fundamental Factors”, The Journal of Portfolio Management, Winter 1990.
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