Barron's: Turbulent Times Are Here to Stay. How to Invest for the Next Decade

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This year, investors have endured a near-daily onslaught of market-moving news sketching a picture of slowing economic growth, elevated inflation, and flagging fiscal and monetary stimulus. In response, the S&P 500 index has tumbled more than 22% from its record high, and bonds have lost about 14% since January. Amid the torrent of reports—everything from monthly inflation and jobs numbers to seemingly every utterance of Federal Reserve officials—it’s easy for investors to get caught up in the here and now.

Yet investing success is most dependably achieved with a long-term perspective. That’s why this Guide to Wealth is all about taking a long view. In this and related stories, we identify strategies and trends—as well as stock, bond, and fund picks—that we expect to work for the next 10 years.

With stock and bond indexes projected to have low-single digit returns for the next market cycle, a long-term portfolio should look very different going forward than it did in the past 10 years. We suggest engaging in active stock-picking, or buying funds that do so, rather than deploying passive indexes; adding alternatives; and, yes, adding to fixed income.

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Value stocks and businesses throwing off the most cash with higher shareholder returns are likely to be competitive. The S&P 500 remains overweight the last cycle’s winners; the average stock in the index could beat the index’s overall performance, which is overwhelmingly influenced by its largest-market-cap components.

There will be opportunities for stockpickers in innovative new frontiers. Labor shortages and a potential shift in supply chains closer to home will spur investments in factories that rely more on robots and automation. Renewable-energy generation will take share from fossil fuels. Genomics, telehealth, and Big Data will transform the way more people receive healthcare. Applications of artificial intelligence—whether predictive analytics, natural language processing, computer vision, or another area—will become more widespread across companies and sectors.

Success won’t go only to the companies making the technology, but also to those using it to become more productive, efficient, and competitive. “That’s a contrast to the past 14 years, which was singularly about one ecosystem,” says Shalett. “That was the smartphone-centric ecosystem of e-commerce and social media…Moving forward, we think the new winners are not necessarily going to be about the tech makers, but the tech takers.”