They say it's really hard to beat the S&P 500. I really don't think so. This chart doesn't show the performance of the semiconductor sector. It shows the *difference* between the semiconductor sector's performance and the performance of the S&P 500. This sector has consistently outperformed, even this year, when the sector faced major headwinds from flagging demand and the China trade war. With trade talks in the works and AI research booming, there's no end in sight to the semiconductor boom.
Another sector that has blown away the S&P 500 is the software sector. Again, AI is booming, and the software sector is principally responsible for developing it. Plus, as we become more and more dependent on technology, this sector is responsible for creating the interfaces between ourselves and our devices. I anticipate no end to this sector's outperformance.
Another long-time winner against the S&P is the aerospace sector. With an increasingly interconnected world, air travel should continue to be important. There's some possibility here that the industry will be disrupted by ground/sea transport alternatives like the hyperloop, but that's just a pipe dream at the moment. Aerial supremacy also remains central to modern warfare, and should remain so for the foreseeable future. And then there's the final frontier: space travel. The private sector has taken an increasing interest in launching satellites and spaceships, and the space travel boom should continue to grow unless it runs up against the Kessler Syndrome.
Worthy of honorable mention is the healthcare sector. In my opinion, this sector has outperformed mostly due to a kind of inefficiency bubble. If the sector became notably more efficient-- either by cutting out middlemen and administrators or by implementing a more transparent pricing system-- it could experience a significant contraction. In some ways that's already happening, with the advent of teledocs and discount health clinics. There also remains a lot of political risk here. Republicans want to repeal more of the ACA, which could shrink the insurance market, and Democrats want to impose price controls and abolish private insurance altogether.
P.S. To see how any equity's performance compares to the S&P 500, put "/SPY" after the ticker.
Another sector that has blown away the S&P 500 is the software sector. Again, AI is booming, and the software sector is principally responsible for developing it. Plus, as we become more and more dependent on technology, this sector is responsible for creating the interfaces between ourselves and our devices. I anticipate no end to this sector's outperformance.
Another long-time winner against the S&P is the aerospace sector. With an increasingly interconnected world, air travel should continue to be important. There's some possibility here that the industry will be disrupted by ground/sea transport alternatives like the hyperloop, but that's just a pipe dream at the moment. Aerial supremacy also remains central to modern warfare, and should remain so for the foreseeable future. And then there's the final frontier: space travel. The private sector has taken an increasing interest in launching satellites and spaceships, and the space travel boom should continue to grow unless it runs up against the Kessler Syndrome.
Worthy of honorable mention is the healthcare sector. In my opinion, this sector has outperformed mostly due to a kind of inefficiency bubble. If the sector became notably more efficient-- either by cutting out middlemen and administrators or by implementing a more transparent pricing system-- it could experience a significant contraction. In some ways that's already happening, with the advent of teledocs and discount health clinics. There also remains a lot of political risk here. Republicans want to repeal more of the ACA, which could shrink the insurance market, and Democrats want to impose price controls and abolish private insurance altogether.
P.S. To see how any equity's performance compares to the S&P 500, put "/SPY" after the ticker.
Comment:
Here's another long-term outperforming sector I neglected to mention the other day: Internet retail. I think this should remain a strong sector due to the lower costs of the Internet vs. storefront retail model, though there's a lot of cyclicality in retail due to changes in consumer demand, so it's less of a "sure thing" than the other sectors I mentioned. Also, eventually Internet retail may reach a saturation point.
