10 key trends for investors in '09

By Jim Jubak

If you hope to make any serious money in 2009, you're going to have to beat the stock market. After netting out a grim first half of the year and a recovery in the last quarter, the major indexes will be lucky to show a 6% gain for the year.

That kind of number will be a huge disappointment for investors looking to recover from what Wall Street has begun to call the lost decade. Over the past 10 years, the returns from investing in a stock market index, such as the Standard & Poor's 500 ($INX), have been squat. No, make that negative squat. The overall stock market lost money in that period.

Fortunately, you don't have to go to the ends of the earth to beat the index. I'm going to tell you about a strategy to do just that in this column. It's not complicated. You can do it at home. And it's been shown to work over the past 11-plus years.

It's the strategy that I've used for the Jubak's Picks portfolio, and it's the strategy I explain in my new book, "The Jubak Picks," which hits bookstores today. As of Dec. 22, the Jubak's Picks portfolio was beating the total return on the S&P 500 over 10 years by 184 percentage points.

It's simple: Put more money into the hot sectors of the market as they heat up. Sell those sectors when they get too hot. And put very little money into the sectors that are cold or cooling.

• Play the video to the right to learn more about the big losers in 2009 ->

The key to this strategy is doing a good job picking the hot and cold sectors. That can help you make more money in your portfolio even if you don't follow my strategy exactly. In this column, I'm going to give you my take on the hot and the cold trends for 2009.

Nothing mysterious

Let me start by showing you how this kind of top-down investment analysis can work. No black boxes here. I think this system makes good common sense.

Stock market history shows that you don't have to invest in mind-bendingly complex derivatives, luck into a big position in the Tunisian stock market (the best-performing stock market in 2008) or turn your money over to some slick-talking guru to beat the index.

If, instead of investing in the entire 500 stocks that make up the S&P index over the past 10 years, you had, for example, invested in just the energy stocks among that 500-stock group -- using, say, the Energy Select Sector SPDR (XLE, news, msgs) exchange-traded fund -- you would have earned a total average return of 9.54% a year for these 10 years. An investment in the stodgy old utility sector, via the Utilities Select Sector SPDR (XLU, news, msgs), would have returned an average of 3.75% annually for those 10 years. The Materials Select Sector SPDR (XLB, news, msgs) would have returned 3.48% a year.

You could also have beaten the negative 0.93% annual return from the S&P 500 just by staying away from a few sectors. Staying away from the technology sector -- the Technology Select Sector SPDR (XLK, news, msgs), for example -- would have improved your portfolio performance. That sector lost 6.04% a year, on average, for the decade. Keeping away from financials, including the Financial Select Sector SPDR (XLF, news, msgs) and its 3.42% average annual loss, would have helped, too.

• Talk back: Which trends and which sectors matter to you for 2009?

How do you tell which sectors are getting hot and which are not? In my new book, I tackle the problem by dividing the stock market not into sectors but into 10 economic macro trends that will drive the global economy for the next decade or two. What's the advantage of tracking trends instead of sectors? It's relatively easy for the average investor to gauge the temperature of one of these trends by reading a daily newspaper, the financial press, such as the Financial Times or The Economist, and Internet sites such as MSN Money.

• Facebook users: Click here to become a fan of Jim Jubak

A skilled chart reader can do much the same thing using the tools of technical analysis, of course. And I'm by no means denigrating the usefulness of technical analysis. In fact, I devote a chapter of my book to explaining some of the basics that trend-following investors can use to improve their reads of each trend. It's just that my 11-plus years on this beat have convinced me that a lot of smart, well-informed and thoughtful investors simply don't have time to conquer technical analysis. These investors can follow macro trends to get market-beating returns.

10 macro trends

Take a look at my 10 macro trends, and afterward I'll explain which are hot and which are not for 2009. In my book, you'll find a chapter devoted to each:

1. Go where the growth is, and that means putting some money into the developing economies of China, India and Brazil.
2. The rise of the global blue chips. These companies are emerging from the world's developing economies to challenge Coca-Cola (KO, news, msgs), IBM (IBM, news, msgs) and Wal-Mart Stores (WMT, news, msgs) on the global stage.
3. The world is getting wealthier and older at the same time. So who's going to manage all that retirement money?
4. Inflation is beginning a new era. After 20 years of low inflation, the world is headed for a decade of rising prices.
5. The world may not be running out of oil -- then again, it might be -- but it sure has run out of cheap oil. You can make back in the stock market what you pay at the pump -- and more.
6. The commodity crunch. Developing economies are demanding more iron, more copper, more nickel, more coal -- and that has set off a boom for mining companies and the companies that equip them.
7. Food is the new oil. It's turning out to be as hard to increase food supplies as it is to find new oil. We're looking at a decade of higher food prices driven by competition with biofuels and the fact that people in the developing world will eat more pigs, chickens and other sources of protein as their incomes rise.
8. We've dragged our feet, but environmental problems have become so pressing that it's time to save the world and make a buck.
9. The technology sector doesn't look anything like it used to, but fortunately the same rules still apply to what I call "hidden tech" stocks.
10. It used to be that stocks and bonds from the United States got a premium in the financial markets just for showing up. Investors were willing to pay more because the U.S. markets were so stable. They're still among the world's best in that category, but now they've got company from Canada, Australia and, of all places, Brazil.

Continued: 3 hot trends for 2009

 1 | 2 | 3 | next >