Seeking the secular growth trend
At times, we like to take a step back from the more tactical, short-term look at the markets and focus our attention on identifying themes in the global economy that we may want to participate in as investors.
Secular growth trends typically entail demographic shifts, innovative or disruptive technologies, changing consumer preferences or additional resource discoveries. Normally, these trends rely less upon the strength of the broad economy and more on other factors such as manufacturing.
Roughly 80 million baby boomers will be swelling the ranks of senior citizens during the next 20 years, adding significantly to the country's 65-and-up population. By 2030, the U.S. Census Bureau expects the number of seniors to reach 72.1 million, 19.3 percent of the population.
According to members of Morgan Stanley Smith Barney’s Global Investment Committee, this ‘senior boom’ represents a sustainable, broad-based and long-lived secular growth trend that offers fertile ground for investors.
Some potential investment opportunities to look for in regards to the Baby Boomer secular growth trend were outlined in a recent Morgan Stanley Smith Barney “On the Markets” report (July, 2012):
• Health care – Health care companies are among the largest beneficiaries of the senior growth trend. The Morgan Stanley Smith Barney’s Global Investment Committee report states “we favor specialty pharmaceutical companies with leading market positions in eye care and medical aesthetics such as facial fillers and wrinkle prevention. We also like firms providing information systems that help increase utilization, improve cost-containment efforts and aid transition to electronic records.”
• Dividend paying stocks - Retirees typically turn to their investment portfolios for income more than capital gains. However, with short-term and long-term interest rates at historic lows, certificates of deposit or bonds alone are not likely to provide enough returns. “That is why we believe seniors will need high-quality, dividend-paying stocks to meet their income requirements,” states the report.\
Besides the aging boomer trend, we also see secular growth trends in corporate data analysis, Chinese strategic priorities and U.S. natural gas. Look for more information on investment opportunities in these areas in my next articles.