Vasco Da Gama was a great navigator who literally turned the tables on geopolitics and the rise and falls of empires and sectors.. With him began the rise of the maritime empire of Portugal and the fall of the city of Venice, which dominated that trade with its endless caravans to the east.
Commanding four ships, Vasco Da Gama left Lisbon in July 1497 and arrived in Calicut in India on May 20, 1498, returning to Portugal in July 1499 with only 55 of the 170 men who left, but with tons of spices. which were that the Europeans imported through other routes. The naval feat was also economical, since the cost of the mission was multiplied by 60.
And here comes the big lesson for investors. When a new competitor enters the market, the new ones win and the old ones lose. In the case we are talking about, Genoa and Venice began their decline and Portugal achieved glory.
If we look with a little distance at what has happened in the markets, investors can see that there have always been some winning sectors and others losing ones.
See historically what the weight of certain sectors in the stock markets has been, In the 70s it was the oil companies, in 2000 it was the technology companies, in 2008 it was banks and real estate companies, and in 2020 it is clearly the technology companies again.
We must stick with the teachings of the Portuguese navigator, reaching consumers and clients with new products that give us a lot of margin and that attracts investors who seek growth and profitability, even at a higher price than other companies.
Look at the weight that technology companies are having aCurrently in the SP 500, they are already at almost 40% of their weight in just 10 stocks.
Only in the great depression were there a small number of companies that weighed so much in the market (Banks and industrialists)
Innovations and new products change the rules of competition and place the winners on another level.
For example see In the motor sector, only Tesla and its electric vehicle are worth more than the rest of the major combustion engine competitors.
Investors always bet on innovation when it shows that the numbers work out.
And at this time we must consider whether we are close to a bubble or the party in technology can still continue to rise.
Well, look at the following graph that shows how bubbles have behaved in the past and the current situation.
We clearly see that artificial intelligence would still be far from being considered a bubble. Despite its current valuations.
Investors must always look at who is new to the market, which index or sector is beginning to have bullish traction in the stock market, and stay away from sectors that begin to fall like old empires.
According to our premium strength and trend indicators, today the major Spanish, European and US indices are strong and with a long-term upward trendalthough we are beginning to see some subtleties in the medium term.
The year has ended without the Christmas rally, but the markets have had a great 2024, so in the medium term we have a little more uncertainty, let’s see what happens this first month of the year.
Y At a sectoral level, we must look at which sectors are still strong on the stock market, both in the US, Europe and Spain.. Because they are the sectors in which we must ensure that our investments are and not in the weak ones.
Monitor strong sectors and invest within these sectors in the strongest stocks in the market.
You can do this with our premium strength and trend indicators