Forecasting the Future of Your 401(k): What to Expect

This new year will be a year of surprises. Actually, you have probably noticed that all facets of life are speeding up, so new economic developments will come at us faster and furious-er (Is that a word?). In some cases, the typical investor will not have enough time to fully digest and react to one new financial or economic reality before getting hit with another.

Stock Investors Will Have a More Profitable Future than Bond Investors

How so? We think stocks are reasonably priced now, but we envision three categories where stocks will out-perform the overall stock market, and this is where astute investors should be looking when rebalancing their portfolios:

1) Sustainability: The US economy should emerge from the pandemic era stronger than before. Regarding Sustainability, frequent and destructive natural disasters and the need to reverse global warming will drive this sector to out-perform all others.

2) Technology: Anyone hear about electric cars? The second area of innovation is in digital transformation. The auto industry will be the driver and the epicenter for disruption and opportunity. The electrification of the global transportation fleet will prove to be the driving force, no pun intended.

3) Healthcare: We are all getting older (and for some of us, maybe wiser?): Think how covid-19 turned the world on its head. Researchers are looking to see whether the mRNA vaccines developed to fight covid can be used to treat other diseases.

And Shed a Tear for Bond Holders

Why? Because interest rates will go up. Inflation too. These are facts that are not in dispute. In an era of rising interest rates the negative impact on bond portfolios is locked in. Fixed-income securities and bank savings will face a challenging outlook as interest rates and inflation battle for lead position in the marketplace. Our bet is on inflation to stay consistently ahead of interest rates over the next few years, which is bad news for savings accounts and fixed-income portfolios.