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If you think about it, investing over the past decade has been rather easy.
Interest rates have been low, which is usually bullish for equities. Companies have used technology to squeeze out costs and pad their profits and valuation multiples. The U.S. economy has been a job creating machine post Great Recession. More often than not given this favorable backdrop, picking a successful investment has boiled down to wagering on fast-growing companies (see the ‘FAANG’ cohort), potential takeover targets or identifying compelling turnaround stories.
Most strategists on Wall Street think the next decade will be tougher for investors though, but not without solid opportunities to make money. Consider this: investment bank UBS points out that over the next decade 790 million people worldwide will move into cities. That could spur strong demand for everything from Starbucks coffee in second tier cities in China to Uber rides in New York City.
UBS adds that the number of internet users will rise to 7.5 billion from 4.3 billion, potentially creating attractive opportunities to invest in 5G companies such as Verizon (Yahoo Finance’s parent company) and cloud computing providers Microsoft and Amazon.
Meanwhile, the strategists at Bank of America Merrill Lynch highlight several interesting trends for investors to ponder looking out to 2030.
BAML notes recession risk is on the rise given we are late cycle in the U.S. economic growth story. That could lead to winners in real assets and infrastructure as governments spend more to ignite growth. Losers during a recession would be growth stocks, BAML surmises.
BAML also thinks up to 50% of jobs are at risk of automation by 2035. Winners in this movement include big data and AI companies. Besides humans losing, those with subpar supply chains could underperform amid this major tech shift.
Space is another possible opportunity — BAML thinks the space market could be worth $1 trillion by 2030.
No wonder Richard Branson’s Virgin Galactic recently went public and fellow billionaires Elon Musk, Tesla CEO, and Jeff Bezos, Amazon CEO, are all in on space.
Here is what several Wall Street pros have told Yahoo Finance about investing for the next decade.
Keith Lerner, chief market strategist at SunTrust
“We do long-term capital market assumptions based on 10 years and we always talk to our clients about the next five to 10 years. As we are thinking about the next 10 years, we are thinking global equity returns probably in the 6% to 7% range. A balanced portfolio is likely to have lower returns than they have historically [given interest rates]. Infrastructure especially if you have something in Washington where you can finally get some type of bill moved through. I still think technology longer term is going to be a good place. If you look at capital spending is, it’s actually going into software. That will still be positive. But there will also be a lot of cyclical opportunities in value, financials or industrials.”