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Stock market: Where to invest in the decade ahead as boomers pass the torch to millennials – USA TODAY

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The global investing landscape is poised to shift over the next decade, thanks to the largest U.S. generation: millennials. 

As the longest-running bull market enters its 11th year, some portfolio managers are advising clients to stay invested in stocks because a series of trends, including an aging population, smart technology and automation, should further fuel returns in coming years.

Millennials, people born between 1981 and 1996, will be approaching age 50 in 2030, while the tail end of baby boomers will reach retirement age. By 2025, millennials are projected to comprise roughly 75% of the workforce.

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Baby boomers and the so-called silent generation that preceded them control about 77% of wealth, according to Fundstrat Global Advisors’ analysis of the most recent Federal Reserve Survey of Consumer Finances. But that is about to change. By 2030, millennials will hold five times as much wealth as they have today and are expected to inherit over $68 trillion from their predecessors, according to a study by Coldwell Banker Global Luxury.

That demographic shift, economists say, is expected to help boost U.S. economic growth and credit demand as more young adults buy big-ticket items like houses and cars. That will also reshape industries they’re closely aligned with, including technology, e-commerce and social media, they said. 

“Economic expansions don’t die of old age,” says Larry Adam, chief investment officer for the private client group at Raymond James. “But I do think it’s going to get more challenging over the next decade.”

The 2020s won’t be all about Big Tech

High-growth technology companies including the popular FAANG stocks – Facebook, Amazon, Apple, Netflix and Google parent Alphabet – have propelled the decade long bull market. Investors, however, have now opted for beaten-down value stocks like energy and financial sectors that have underperformed the broader market in recent years.

Although tech shares aren’t expected to repeat their performance over the past decade, some experts continue to favor them over the long term because of the far-reaching impact they have on other industries.

“The technology sector continues to reinvent itself,” Adam says. “Every sector has some form of technology.”

Investors who are searching for other parts of the market to potentially deliver above-average growth in the coming years should look to stocks that have exposure to sustainable investing, digital transformation and genetic therapies, analysts at UBS said. 

Emerging markets come back in favor

Emerging market assets, which have been pummeled in recent years by fears of slowing global growth, are expected to come back in favor as  population growth rises and de-escalating trade tensions. 

Demographics are expected to be a significant driver of growth across many economies. Investors are betting on growth potential in India, as the economy is on track to overtake China as the world’s most populous country by 2027, according to the United Nations.

Meanwhile, Vietnam, one of Asia’s fastest-growing economies, has been a haven for U.S. multinationals looking to shield themselves from the U.S.-China tariff spat. 

“There’s huge growth potential in Asia,” says Rich Sega, global chief investment strategist at asset manager Conning. “The geopolitical stress in Hong Kong has opened up opportunities for other areas in the region for Vietnam, Thailand and Singapore.”

Don’t count out U.S. stocks

To be sure, economists are optimistic about domestic growth and don’t foresee a recession within the next year. Economists project a 35% chance that the U.S. economy will enter a downturn between now and the November presidential election, according to Bankrate’s Fourth-Quarter Economic Indicator survey. That’s down from 41% from the prior quarter.

Some analysts believe this economic expansion and record run still has legs.

“U.S. stocks will surprise investors,” says Thomas Lee, managing partner and head of research at Fundstrat Global Advisors. “Too many people are betting on a bounce-back in emerging markets.”

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More China coal investments overseas cancelled than commissioned since 2017

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More China-invested overseas coal-fired power capacity was cancelled than commissioned since 2017, research showed on Wednesday, highlighting the obstacles facing the industry as countries work to reduce carbon emissions.

The Centre for Research on Energy and Clean Air (CREA) said that the amount of capacity shelved or cancelled since 2017 was 4.5 times higher than the amount that went into construction over the period.

Coal-fired power is one of the biggest sources of climate-warming carbon dioxide emissions, and the wave of cancellations also reflects rising concerns about the sector’s long-term economic competitiveness.

Since 2016, the top 10 banks involved in global coal financing were all Chinese, and around 12% of all coal plants operating outside of China can be linked to Chinese banks, utilities, equipment manufacturers and construction firms, CREA said.

But although 80 gigawatts of China-backed capacity is still in the pipeline, many of the projects could face further setbacks as public opposition rises and financing becomes more difficult, it added.

China is currently drawing up policies that it says will allow it to bring greenhouse gas emissions to a peak by 2030 and to become carbon-neutral by 2060.

But it was responsible for more than half the world’s coal-fired power generation last year, and it will not start to cut coal consumption until 2026, President Xi Jinping said in April.

Environmental groups have called on China to stop financing coal-fired power entirely and to use the funds to invest in cleaner forms of energy, and there are already signs that it is cutting back on coal investments both at home and abroad.

Following rule changes implemented by the central bank earlier this year, “clean coal” is no longer eligible for green financing.

Industrial and Commercial Bank of China, the world’s biggest bank by assets and a major source of global coal financing, is also drawing up a “road map” to pull out of the sector, its chief economist Zhou Yueqiu said at the end of May.

 

(Reporting by David Stanway; Editing by Kenneth Maxwell)

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Bank of Montreal CEO sees growth in U.S. share of earnings

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Bank of Montreal expects its earnings contribution from the U.S. to keep growing, even without any mergers and acquisitions, driven by a much smaller market share than at home and nearly C$1 trillion ($823.38 billion) of assets, Chief Executive Officer Darryl White said on Monday.

“We do think we have plenty of scale,” and the ability to compete with both banks of similar as well as smaller size, White said at a Morgan Stanley conference, adding that the bank’s U.S. market share is between 1% and 5% based on the business line, versus 10% to 35% in Canada. “And we do it off the scale of our global balance sheet of C$950 billion.”

($1 = 1.2145 Canadian dollars)

 

(Reporting by Nichola Saminather; Editing by Leslie Adler)

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GameStop falls 27% on potential share sale

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Shares of GameStop Corp lost more than a quarter of their value on Thursday and other so-called meme stocks also declined in a sell-off that hit a broad range of names favored by retail investors.

The video game retailer’s shares closed down 27.16% at $220.39, their biggest one-day percentage loss in 11 weeks. The drop came a day after GameStop said in a quarterly report that it may sell up to 5 million new shares, sparking concerns of potential dilution for existing shareholders.

“The threat of dilution from the five million-share sale is the dagger in the hearts of GameStop shareholders,” said Jake Dollarhide, chief executive officer of Longbow Asset Management. “The meme trade is not working today, so logic for at least one day has returned.”

Soaring rallies in the shares of GameStop and AMC Entertainment Holdings over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets.

Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp down 15.2%, burger chain Wendy’s falling 3.1% and prison operator Geo Group Inc, one of the more recently minted meme stocks, down nearly 20% after surging more than 38% on Wednesday. AMC shares were off more than 13%.

Worries that other companies could leverage recent stock price gains by announcing share sales may be rippling out to the broader meme stock universe, said Jack Ablin, chief investment officer at Cresset Capital.

AMC last week took advantage of a 400% surge in its share price since mid-May to announce a pair of stock offerings.

“It appears that other companies, like GameStop, are hoping to follow AMC’s lead by issuing shares and otherwise profit from the meme stocks run-up,” Ablin said. “Investors are taking a dim view of that strategy.”

Wedbush Securities on Thursday raised its price target on GameStop to $50, from $39. GameStop will likely sell all 5 million new shares but that amount only represents a “modest” dilution of 7%, Wedbush analysts wrote.

GameStop on Wednesday reported stronger-than-expected earnings, and named the former head of Amazon.com Inc’s Australian business as its chief executive officer.

GameStop’s shares rallied more than 1,600% in January when a surge of buying forced bearish investors to unwind their bets in a phenomenon known as a short squeeze.

The company on Wednesday said the U.S. Securities and Exchange Commission had requested documents and information related to an investigation into that trading.

In the past two weeks, the so-called “meme stocks” have received $1.27 billion of retail inflows, Vanda Research said on Wednesday, matching their January peak.

 

(Reporting by Aaron Saldanha and Sagarika Jaisinghani in Bengaluru and Sinead Carew in New York; Additional reporting by Ira Iosebashvili; Editing by Sriraj Kalluvila, Shounak Dasgupta, Jonathan Oatis and Nick Zieminski)

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