Top Stock Market Sectors

IronFX Team — Wed, 16 Jun 2021 12:44:04 +0000

While investors have enjoyed gains in the S&P 500 which traditionally gives them access to 500 of the largest publicly-traded companies in the United States, different sectors have also gained interest, especially with the market showing signs of stagnation. Traders and investors are usually opened to new investment opportunities and it is always recommended not to keep all your eggs in one basket and diversify your portfolio. This is why, in this article we take a look at various stock sectors that have shown potential to outperform the general market.

For example, many traders have turned to two stock sectors that have gained increasing attention, especially during the current coronavirus pandemic. Technology stocks and health care stocks are both considered to be essential parts to the general economy and tend to attract investor capital. This fact alone pushes stock prices in these two sectors higher despite the state of the economy or regardless the way financial markets are performing. While forex traders usually focus on trading or exchanging USD to GBP و GBP to USD, stock traders have recently turned to these two sectors as well as the energy sector as discussed below.

Energy Stocks

Energy stocks have been doing quite well this year. Especially, clean energy stocks have been very popular as traders have expected that President Joe Biden’s infrastructure plan will impact on a number of stocks in the energy sector.

Biden’s American Jobs Plan will seek to support various areas with targeted investment including fixing transportation systems and infrastructure, building a renewed electric grid, providing high-speed broadband to all Americans, building and preserving more than 2 million homes and commercial buildings, upgrading veterans’ hospitals and revitalising manufacturing and securing US supply chains, among many others. This is why, many traders are interested in clean energy stocks such as Gevo (NASDAQ:GEVO) which is a company in the renewable fuels space, and ChargePoint (NYSE:CHPT), which is an EV charging infrastructure company.

Healthcare Stocks

As one of the most popular stock sectors, healthcare stocks perform well in general as demand for healthcare is always high and stable despite of what is happening in the economy or the financial markets. At the same time, the sector has shown a steady increase in revenues because of the lifesaving capabilities provided by the industry and the continued financial support it has enjoyed. From hospitals to makers of specialty medical devices and equipment, pharma and biotech companies, the sector is wide-ranging. The industry is also closely knit with technological advancements which has also helped to boost industry revenues.

Tech Stocks

The technology sector has been a very healthy one due to ongoing technological improvements. This is why technology stocks have performed well during market advances. The sector includes information technology (IT) companies, internet-related firms, and high-tech devices’ companies. Companies manufacturing computer hardware, software and semiconductors are also part of the sector.

Recently, tech stocks have reached new highs, following an announcement from the White House about President Joe Biden’s multitrillion-dollar US stimulus plan that will offer funding for scientific research and broadband as well as infrastructure and healthcare.

With more financial support provided to these sectors and the increasing importance they demonstrate in saving and improving human lives, these stock sectors are expected to continue to perform well.

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What are Sin Stocks?

IronFX Team — Wed, 16 Jun 2021 13:00:27 +0000

Sin stocks are shares in companies who may be considered unethical or immoral. A sin stock portfolio, for example, will mainly include shares in alcohol, tobacco, gaming, or defence companies, whereas, what is known as ethical or socially responsible portfolios will include stocks in companies related to financial, technology, medical, or alternative energy sectors.

Many have argued about whether sin stocks can provide higher returns than ethical stocks, but this has been questioned by a European study which has found that there is no significant difference in returns between ethical and so-called unethical portfolios.

In this article, we look at sin stocks and why investors find them interesting.

Why investors prefer sin stocks

Sin stocks are not everyone’s cup of tea. They are considered defensive stocks, as they appear to perform well even during an economic recession, but they involve risks relating to regulations and taxes.

Supporters of sin stocks often lay emphasis on how many ethical stocks have high management fees which limits returns. They also stress that fund managers avoid sin industries which makes sin stocks comparatively cheap, while the consistent cash flows mean that sin stocks can make large dividend payouts. This, combined with low stock prices, means that investors can get remarkably good dividend yields.

Why investors avoid sin stocks

However, high dividend yields of sin stocks are very often avoided by investors as many of them highlight the dubious character and effect of the sin industries on society.

Another reason that sin stocks might not appear as appealing to investors is the prospect of taxation on such goods as alcohol and tobacco. In such countries as the US, UK and Japan, there is increasing pressure for those countries to increase taxation on tobacco and alcohol. Furthermore, it is expected that government defence expenditures will be reduced too. The gaming industries could also face increased taxation, which would eventually limit sin industry profits. For current investors in sin industries this could potentially affect their returns.

There’s high regulatory risk with sin stocks, as rules can change depending on political parties and international activity, making certain industries illegal or legal.

Additionally, consumers change their attitudes towards certain products which can also lead to limited or increased interest in certain products such as tobacco.

With, 2008 and the financial crisis, a lot of investors have turned away from excesses and towards ethical concerns and businesses, which also means that the future will continue to be dominated by more ethically oriented businesses and investing.

What to consider when investing in any stock

For example, Islamic investors, following Shariah law, will avoid investments in alcohol, tobacco, pork, gambling, pornography as well as short selling, speculation, and derivatives. Others might avoid shares in companies that their products go against their personal beliefs, whether that is animal rights or addictive substances.

Whether a company produces ethically grown vegetables or weapons of mass destruction, an investor should be able to make their own choices based on their personal beliefs while ensuring that any shares they invest in are part of a healthy and well-balanced portfolio that includes other assets such as forex or spot metals. In general investing is always about the choices we make and whether we want to be socially responsible or we feel strongly about certain matters. In the end of the day, it is up to the individual investor to decide and whether any ethical concerns should affect their investment choices.