By Kate Gibson
As stock investors hunt for higher returns in light of what some are calling a "new normal" of reduced expectations, analysts point to early- cycle equities as ranking among those that stand to gain as demand for goods picks up, particularly from Asia.
The average rate of return in any rolling 20-year period stands at around 11%, but investors would be wise to dial down their expectations, says Doug Lockwood, chief investment officer at Cornerstone Wealth Management.
"We're in a bit of a new normal when it comes to investing, and that type of growth rate is probably not possible going forward. You may not want to plan your retirement based on the same appreciation rates as the historical average," Lockwood says.
At the same time, Lockwood believes there is still money to be made in the market.
If the U.S. economy is coming into a sustainable recovery, even with lower growth rates, it follows that the outlook bodes well for stocks in those sectors in which businesses spend -- namely, technology, basic materials and industrials, according to Lockwood.
Moreover, such demand will come "not just from our U.S. economy, but from a lot of these emerging markets that will need more than they can produce in their own country," the adviser said.
Early in the current reporting season, companies including blue chips Intel Corp. (INTC) and Johnson & Johnson (JNJ) reported "terrific results" in large measure because of increased demand from emerging markets, said Fred Dickson, chief market strategist at Davidson Cos.
"There's a huge list of companies that have a large multinational footprint that were helped by the declining dollar and surging demand, particularly from Southeast Asia," Dickson said.
Illustrating that trend, the chairman of Emerson Electric Co. (EMR) on Friday reportedly said the industrial conglomerate expects emerging markets including China, India and Southeast Asia would make up for as much as 45% of its sales within five years.
On Wall Street, the major benchmarks retreated sharply to close out the week, reversing course after their biggest single-day jump in more than three months. Financials, energy and materials traded down the most in Friday's action.
The Dow Jones Industrial Average (DJI) fell 148.73 points, or 1.5%, to 9,813.85. The S&P 500 Index (SPX) dropped 17.73 points, or 1.6%, to 1,048.38, and the Nasdaq Composite (RIXF) slumped 31.49 points, or 1.5%, to 2,066.06.