The volatility and lack of clear direction in equities since the middle of last year suggests re-examining the likely winners and losers going forward. While the 2008/2009 decline was led by financials, the most recent turmoil in equity markets has been spearheaded by energy – in response to falling housing and oil prices, respectively. Moreover, in contrast to these sectors technology (best captured by the Nasdaq 100) remains well above its pre-2009 highs. That raises the question of how dislocations in numerous industries (e.g., Amazon in retail; Airbnb and Uber in travel) spawned by leapfrogging technological advances is impacting more traditional business activities like banking dominated by “too big to succeed” firms. (See our previous feature – Sector Dynamics).
Technology driven financial disintermediation and enhanced energy efficiency/alternative sources may be reducing future prospects for the financial and energy sectors not yet priced in. More generally, it implies that avoiding potential secular laggards has become more important looking ahead.
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