There are lots of areas right now that look promising for investors, which include:
- AI (artificial intelligence)
- VR (virtual reality)
- Marijuana
- Healthcare
- Transportation
BUT… and there is a huge but here… we need to understand what is going on in our economy and financial world right now.
Even though we (as humans) are seeing unbelievable advances in technology, healthcare, and the general quality of life, there are enormous risks in the financial world.
Now, I’m not being negative, I’m just being realistic. (I’m actually extremely excited for our future, as we are living in exciting times.)
So, here are three realities:
#1 The US market is about to become the second longest bull market ever. If we assume that everything is cyclical, then we are closer to the end of the cycle rather than the beginning. Translation = a pullback is much more likely than a huge push higher.
Source: The Leuthold Group
#2 Credit has fueled our incredible recovery since 2008. But this credit is just debt. Debt that is piling on faster and faster and will have to be paid back somehow. There will be a day when this debt will be too much to bear.
Source: NYSE Margin Debt and the Market
#3 The top five companies determined by market capitalization are all tech companies. And some of these companies aren’t even making a profit. They have enormous revenue, but are not walking away with huge profits. They are valued by their future potential, not their current profits. Sooner or later something has to give.
Source: Amazon climbs into top 5 biggest US companies by market cap
Now, I am not banging the “Armageddon is coming” drums. I’m saying that an investor should look very carefully where they deploy their money, as it’s very possible they will never get anything back.
So, what are some smart financial and business decisions to make for 2017?
The smartest financial and business decision may be avoiding the next market correction AND figuring out ways to profit from the decline.
That’s what I am planning for now. I’m not 100% banking on a market crash, because I invest in many areas. I do, however, think that this is a large problem that all investors should be preparing for.
