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Most Profitable Investments Of The Decade – Today, the American economy is very different from what it was hundreds of years ago. While railroad stocks dominated the 19th century, the technology and health industries have grown dramatically in recent years. As the dynamics change, what are the fastest growing industries of the future?
In this data from New York Life Capital, we’ve found the fastest-growing industries over the next decade.
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The US economy is growing. From 2019 to 2029, total industrial output is expected to increase by more than 20%.
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Output is the value of final goods and services, as well as intermediate sales that are not included in gross domestic product. In this case, the production chain is based on 2012, a method that uses 2012 as the base year to adjust real dollar amounts over time for inflation.
Below we list the fastest-growing industries from 2019 to 2029, according to the U.S. Bureau of Labor Statistics.
As patients demand more convenient and less expensive care, ambulatory care centers are gaining popularity. Advances in medical technology, such as minimally invasive surgery, allow for same-day discharge. This is the expected growth of the industry.
However, investors may want to consider that implementing information technology (IT) is their biggest challenge for healthcare leaders.
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The growth of e-commerce and digital marketing is likely to contribute to this sector’s success. For example, e-commerce in the United States grew by 32% in 2020. Driven by this trend, the annual growth rate of computer system design firms may exceed 3%.
On the other hand, investors may observe the high capital costs of some IT companies to upgrade outdated platforms.
This industry includes companies involved in the production of oil and natural gas. Some examples are:
As inflation rises, mining companies can benefit from higher prices and wider margins. The industry is expected to have the third highest growth rate in the next decade.
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However, investors may consider the growing appeal of sustainable investing. Although oil demand is not expected to peak until 2035, the transition to clean energy could pose long-term challenges to the sector.
In wealthy Western countries, consumption of trusted news brands is growing, and paid subscriptions are on the rise. In addition, Google has committed at least $1 billion in content licensing to publishers for its News Showcase product. Below is the potential growth of information services companies.
On the other hand, advertising revenue is declining in some segments. Investors studying this industry may want to consider platforms that are diversifying their revenue streams.
Companies that design, build and deliver software top the list of the fastest growing industries. Some examples are:
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With the rise of remote work and e-commerce, software can help businesses communicate with employees and customers. The industry is expected to grow at a CAGR of nearly 5% from 2019 to 2029.
At the same time, the industry’s barriers to entry are relatively low. Investors may want to keep an eye out for competitors that emerge from time to time and threaten the market share of existing companies.
Investors with a long-term perspective can consider investing in these potential areas. Driven by market trends, the fastest-growing industries fall into three broad areas:
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Data Guide: Three Types of Economic Indicators From GDP to interest rates, this data shows the main economic indicators of the broad trajectory of the US economy.
Each indicator provides data and economic measures that help us better understand its relationship to the economic cycle. When investors navigate the market environment, there are three main indicators to distinguish:
New York Life Insurance provides a roadmap of the above data indicators and what they can tell us about the economy.
Leading indicators provide economic data that indicate the future direction of the economy. Here are three examples.
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This key measure shows consumer spending and savings plans. When the index is above 100, consumers are likely to spend more next year. In December, the index rose to 108 from 101 in November. This is partly due to lower inflation expectations and an improved job outlook.
In the December survey, 48% indicated that the labor market remained strong, reflecting the strength of employment opportunities and future spending sentiment.
The ISM Purchasing Managers’ Index shows expectations for new orders, spending, employment and economic activity in the U.S. manufacturing sector. The table below shows how the index breaks down according to the selected measures:
For example, the index fell in November for the first monthly contraction since May 2020. The decline in new orders suggests weaker demand, while the number of job cuts suggests a decline in production across the sector.
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The S&P 500 Index indicates the direction of the economy because future performance depends on prices. As such, the S&P 500 index can represent investor confidence, as the index is often a proxy for the US stock market. By 2022, index returns will be around 20%.
Corresponding indicators reflect the current state of the economy, indicating whether it is in a state of growth or contraction.
GDP refers to total economic output. It is usually the most comprehensive indicator of the economy as it tracks output across all sectors. In the third quarter of 2022, US real GDP grew at an annualized 2.9%. This compares with 2.7% for the same period in 2021.
Income growth indicates a healthy economy, while income declines indicate slower growth. Personal income will reach a record high of 7.4% in 2021 as the economy expands rapidly.
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U.S. personal income has grown at a slower pace this year, at an annual rate of 2.7 percent through the third quarter.
Closely related to gross domestic product, the industrial production index refers to manufacturing, utilities, and mining. Next, we show trends in industrial production and how they relate to GDP and personal income indicators.
As the chart above shows, factory production collapsed after the 2008 financial crisis, a deep indicator of the recession. Meanwhile, personal income fell by more than 3% and GDP fell by 2%.
Despite economic uncertainty in 2022, industrial production remains positive, with growth at 4.7%, albeit slightly slower than 2021 levels.
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Like checking the rearview mirror, lagging indicators occur after a significant economic event, often confirming what is happening in the economy. Here are three important examples.
Interest rates often respond to changes in inflation. When interest rates are raised, it slows economic growth and inhibits borrowing. A rise in interest rates is usually a signal of a strong economy and is used to control inflation. On the other hand, low interest rates are good for economic growth.
After years of record low interest rates, the federal funds rate rose to 4.25% in December from 0.25% in March as inflation picked up at its fastest pace in 2022.
This inflation measure can provide an indication of households’ cash flow. Inflation is often the result of rising input costs and an increase in the money supply throughout the economy.
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As increased demand in the economy pushes up prices, inflation may sometimes peak after an expansion ends. In November, U.S. inflation rose to 7.1% year-on-year amid supply chain disruptions and pressures from food prices, health care prices and housing costs.
The unemployment rate has many spillover effects, affecting consumer spending and in turn retail sales and GDP. Historically, unemployment tends to fall slowly after economic recovery, so it is considered a lagging indicator. When the unemployment rate rises, it proves that the economy is lagging behind.
Overall, 2022 is shaping up to be a strong labor market, with the October unemployment rate below the historical average of 3.7%.
To get a more complete picture of the economy, combining several indicators is more effective than isolating several variables. These tools allow investors to gain greater insight into the cyclical nature of business cycles while maintaining a long-term perspective on the path forward.
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Europe’s energy crisis and the global economy Europe’s energy crisis is likely to last until 2023.
In the above data from New York Life Investments, we outline the impact of Europe’s energy crisis on consumers, businesses and the wider global economy.
Energy plays a major role in global inflation. How it affects the consumption baskets of countries:
As the chart above shows, energy accounts for half of Germany’s consumer inflation. In the United States, it contributes to one-fifth of total inflation.
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Winter heating costs in the U.S. could hit their highest level in a decade when the power goes out. As heating costs rise, it may affect consumer spending on discretionary items in the economy, along with other important household expenses.
Natural gas and oil are important components of the energy consumption of many industries. As a result, recent increases in energy prices have increased
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