MACRO ECONOMIC SECTOR OUTLOOK - Essay Example

The services provided by the telecommunication sector has become a necessary service for us for our daily life, and hence it can well be expected that consumers as well as business enterprises will not be able to reduce their spending on this service even in recessions. Thus the investment potential of the telecommunication sector seems to be very bright. To gain more from our investments, we can invest in the telecommunication sector of the highly growing markets of India, China, Turkey, etc.

, while retaining our exposure to European countries and the USA. FINACIALS: The interest rate sensitivity of the financial sector is very high and this sector shows a tendency of providing great during the period of low interest rates. Since, the level of interest rates in the USA and European nations are now quite low at the phase of economic recovery, the investments in the financial sector of these nations are expected to provide excellent performance. However, presently investments in this sector involve a great amount of risk due to high inflation in Asian countries and Obama’s financial policies relating to trade.

Due to this reason, we are underweight in this sector. But this should not be a thing of great anxiety as we still possess sufficient weights for having adequate return on out investments. However, we should be cautious about our investment decision in China due to increase in the rate of interest in this nation. Hence, we should limit out exposure to china and concentrate more on the financial markets of USA and Europe as interest rates can be expected to remain low here. MATERIALS: The materials sector has a tendency to outperform other defensive areas during economic expansions.

The materials sector is such a economic field where we can be overweight. Investments in this sector at this time or in near future could be a bit risky as it may loose its growth momentum after the fast growth that it has been experiencing for some time. Moreover, the sector is suffering form lower demand from countries like China which is lowering the prices and negatively affecting the overall performance of the sector. However, we are still maintaining our exposure to this hard commodity sector as we expect that even with lower demand this sector will be able to provide better performance compared to other defensive sectors.

ENERGY: The energy sector is one of those sectors which are expected to provide lucrative returns. This sector has a quite high dependence on oil prices. Since, oil prices are expected to follow an increasing path in future, the energy sector is expected to outperform other areas. Oil prices are expected to rise for a number of factors including reduction in supply of oil by OPEC, increase in demand for oil with economic recovery in USA, Europe, China, India and other nations, expansion of money supply in the USA that is expected to create inflationary pressure.

Thus, it will be a great decision to maintain our exposure in the energy sector. We can also increase our exposure in this sector. We are also increasingly investing in oil services and exploration as they are now placed on high growth path. CONSUMER STAPLES: Being a defensive sector, the sector of consumer staples is facing lower growth opportunities in this period of economic recovery. Rising prices of foods has produced negative impacts on the