After identifying the general market trend, you want to look for the leading sectors.
Why?
It all comes down to maximizing the odds. Ask yourself: would you buy shares of a newspaper company in this day and age? Most likely not. Few people read the news physically. Most of it happens online.
Instead of a growing market, you have a shrinking one. Naturally, demand goes down. It becomes harder to find and keep customers. Employees are less likely to join an old, stagnant industry.
So, you face natural headwinds.
The opposite would be social media companies. These were the big winners of the last decade. Meta’s Facebook and Instagram come to mind. They were clear winners and spread rapidly.
But there were a few promising ones back then as well, like Snapchat and Pinterest. Both lost their way over time.
No trend lasts forever.
Some industry trends last longer, some shorter. We’ve seen this again and again.
Mega trends are long-term shifts that reshape industries. Think railroads, the internet, mobile, and now AI.
Boom and bust trends are short-lived spikes followed by sharp declines. Examples include SPACs and meme stocks.
Cyclical trends move in waves tied to the economy. Oil and gas are a good example, rising and falling with demand and economic growth.
As we’ve seen above, the steeper the trend, the shorter it tends to last.
Sometimes, fads show up along the way.
Ideally, you want the entire industry to do well. If all companies are down except for one, it’s often a sign that the industry has peaked or is about to decline.
A leading industry is like a rising tide that lifts all boats. Not everyone benefits equally, but the overall direction matters.
Bonus Tip: You can check the leading sectors here.
After identifying the general market trend, you want to look for the leading sectors.
Why?
It all comes down to maximizing the odds. Ask yourself: would you buy shares of a newspaper company in this day and age? Most likely not. Few people read the news physically. Most of it happens online.
Instead of a growing market, you have a shrinking one. Naturally, demand goes down. It becomes harder to find and keep customers. Employees are less likely to join an old, stagnant industry.
So, you face natural headwinds.
The opposite would be social media companies. These were the big winners of the last decade. Meta’s Facebook and Instagram come to mind. They were clear winners and spread rapidly.
But there were a few promising ones back then as well, like Snapchat and Pinterest. Both lost their way over time.
No trend lasts forever.
Some industry trends last longer, some shorter. We’ve seen this again and again.
Mega trends are long-term shifts that reshape industries. Think railroads, the internet, mobile, and now AI.
Boom and bust trends are short-lived spikes followed by sharp declines. Examples include SPACs and meme stocks.
Cyclical trends move in waves tied to the economy. Oil and gas are a good example, rising and falling with demand and economic growth.
As we’ve seen above, the steeper the trend, the shorter it tends to last.
Sometimes, fads show up along the way.
Ideally, you want the entire industry to do well. If all companies are down except for one, it’s often a sign that the industry has peaked or is about to decline.
A leading industry is like a rising tide that lifts all boats. Not everyone benefits equally, but the overall direction matters.
Bonus Tip: You can check the leading sectors here.
After identifying the general market trend, you want to look for the leading sectors.
Why?
It all comes down to maximizing the odds. Ask yourself: would you buy shares of a newspaper company in this day and age? Most likely not. Few people read the news physically. Most of it happens online.
Instead of a growing market, you have a shrinking one. Naturally, demand goes down. It becomes harder to find and keep customers. Employees are less likely to join an old, stagnant industry.
So, you face natural headwinds.
The opposite would be social media companies. These were the big winners of the last decade. Meta’s Facebook and Instagram come to mind. They were clear winners and spread rapidly.
But there were a few promising ones back then as well, like Snapchat and Pinterest. Both lost their way over time.
No trend lasts forever.
Some industry trends last longer, some shorter. We’ve seen this again and again.
Mega trends are long-term shifts that reshape industries. Think railroads, the internet, mobile, and now AI.
Boom and bust trends are short-lived spikes followed by sharp declines. Examples include SPACs and meme stocks.
Cyclical trends move in waves tied to the economy. Oil and gas are a good example, rising and falling with demand and economic growth.
As we’ve seen above, the steeper the trend, the shorter it tends to last.
Sometimes, fads show up along the way.
Ideally, you want the entire industry to do well. If all companies are down except for one, it’s often a sign that the industry has peaked or is about to decline.
A leading industry is like a rising tide that lifts all boats. Not everyone benefits equally, but the overall direction matters.
Bonus Tip: You can check the leading sectors here.
