As the U.S. economy recovers and concerns about corporate earnings ease, investors are once again becoming optimistic about the stock market.
Several major companies in recent quarters have produced substantial profits compared to the Great Depression-like earnings posted during the subprime mortgage crisis of 2008 and 2009.
Such profits have been encouraging to investors and analysts, who are predicting that near-and long-term earnings per share levels will be higher than the profits seen in the early 2000s.
A recent report conducted by UBS Wealth Management Research (WMR) as part of its Decade Ahead report predicts that over the next decade stocks will deliver more normal returns – that is, returns similar to those produced before the recessions of 2008-2009 and 2001. The report predicts that the annualized total return for stocks will be 9% over the next 10 years.
“The equity markets are on much more solid footing,” says Jeremy Zirin, Chief Equity Strategist for UBS Wealth Management and author of the Decade Ahead article on stocks. “As a result, the prospect for returns is also on much more solid footing.”
Zirin says equity markets for this decade appear to be in better shape at its start than they were at the start of the last decade based on two significant hallmarks: valuation and sector concentration.
For example, in the current decade stocks are less expensive than in 2000 when many stocks were trading well above their earnings, Zirin said.
What’s more, today’s market has less sector concentration than in 2000 when the Information Technology sector represented 35% of the S&P 500 index market capitalization, according to the Decade Ahead report. Such sector concentration poses significant market risks as meaningful declines in those large sectors can have a greater impact on the overall index, the article said.
The Decade Ahead report is an analysis examining topics ranging from the prospects for stocks and bonds, to U.S. leadership, to the next innovations in technology and healthcare.
To read more from The Decade Ahead — Ten major trends that will impact investors over the next 10 years, please visit http://investmentinsights.ubs.com.
Cognizant of the growing demand for solutions that will help investors take part in the stock resurgence, financial firms have begun developing new ideas and products focused on the equity markets.
For more information about whether stock market investing may be an appropriate financial solution for you, contact your financial advisor as well as your legal and tax advisors.
The information contained in this article is based on sources believed reliable, but its accuracy cannot be guaranteed. This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial advisor, as well as your tax and/or legal advisors regarding your personal circumstances before making investment decisions
.Provided by:
Cynthia H. Shively
Meridian Wealth Management
UBS Financial Services Inc.
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