I’ve been hearing a lot of TV talking heads use the dreaded “R” word.
And it drives me nuts!
I’m talking recession here, if it wasn’t obvious.
After all, the average period between recessions is 6.5 years, and we’ll mark the 10th anniversary of the end of the last recession in June 2019.
But these “experts” are glossing over some important economic data that show we’re not likely to dip into a recession in 2019.
In fact, I’m optimistic about your ability to make money on tech stocks in the New Year. And I’ve identified four major catalysts that will lead to a major tech rebound.
I’m calling these catalysts “Fort Silicon Valley,” for their ability to stave off the doldrums, keep the economy growing, and make you money.
One Word: Disconnect
Absent the past few days, the stock market has been in one of the worst routs I’ve seen in decades.
Indeed, you have to go back to the Great Depression to find a December with a worse performance.
Here’s the thing. I have an honor’s economics degree and wrote my final thesis under the tutelage of a senior official at the Kansas City Fed. My thesis dealt heavily with Depression-era empirical data.
And I can tell you first hand, this ain’t no Great Depression. It’s not even a recession, defined as two consecutive quarters of negative GDP.
Instead, what we’re dealing with is what I like to call the “Massive Disconnect.” Just before Christmas, the tech-centric Nasdaq Composite entered bear market terrain, defined as a 20% drop from a recent high.
If all you did was look at the headlines, you’d think economic growth and corporate earnings had just dropped off a cliff.
But nothing could be further from the truth. Fact is, third-quarter earnings were strong across the board, especially for high-margin tech leaders.
Plus, the economy remains in overall great shape. We have one of the best job markets in nearly five decades, and consumer confidence is near 20-year highs.
But Wall Street’s fears about trade tensions, higher interest rates, and slower economic growth put stocks into a fast tailspin. In other words, fear, not fundamentals, is what’s caused the sharp decline for stocks in every sector of the economy.
The good news is that stocks are beaten down and due for a rebound.
That’s just one of the reasons why I’m optimistic about our ability to make money off market-crushing tech stocks in 2019.
And the firms taking advantage of these four Fort Silicon Valley Catalysts are going to lead the way…
Fort Silicon Valley Catalyst No. 1: 5G Wireless Broadband
When it comes to the next-gen 5G wireless network, the biggest catalyst this year may not come from Silicon Valley.
It might come out of Washington…
Early in 2018, President Donald Trump proposed nationalizing the 5G network. His rationale was simple. He considers this technology so important for modern telecommunications that it’s a matter of national security.
5G technology is a complete upgrade that goes way beyond its dazzling speeds. It’s becoming a linchpin for our tech-driven economy. The new standard for ultra-broadband wireless will play critical roles in mobile, the Internet of Everything (IoE), self-driving cars, robotics, and connected health.
Specifically, President Trump is worried about spying by the Chinese who build components like chips, servers, and routers. Those devices, Trump argued, could give the Chinese a backdoor into sensitive networks.
That original plan went nowhere. But we haven’t heard the last from Trump on 5G, because his administration sees what’s up for grabs. That’s why I’m recommending a great backend play on this new platform in my Nova-X Report Tech 2019 Forecast.
Fort Silicon Valley Catalyst No. 2: Edge Computing
This is going to be a big year for a critical technology that can help fuel advances across multiple tech sectors. This will be a particularly big help for drones and driverless cars – and for millions of 5G devices.
Edge computing is the creation, capture, and analysis of data near the source of that data, or “the edge,” instead of relying on the cloud at a remote data center. We need this edge to drive innovations with platforms that must work independently of the cloud.
One sector in particular stands to greatly benefit from the edge. Simply stated, we can’t have a robust IoE without it. This year, that global grid is expected to rise in value to $947.2 billion. That’s up 270% from $255.9 billion in 2014.
Over the next few years, at least 50 billion devices will all be talking to each other. Eventually, the number of connected devices will rise to 1.4 trillion.
IDC is predicting 2019 will mark a turning point for the IoE. The firm is forecasting that over the next four years, 40% of all data analysis will occur at the IoE’s “endpoints” – the edge.
I’m not the only one who sees a bright future for edge computing in 2019 and beyond. Michael Dell, CEO of Dell Technologies Inc. (NYSE:DELL), predicts edge computing will eventually become 100 times bigger than the web.
Fort Silicon Valley Catalyst No. 3: Artificial Intelligence
Artificial intelligence is now seeping into every aspect of our lives, from how we interact with our voice-activated digital assistants to how biopharma finds new drugs.
And this year marks a major inflection point in the reach of AI, and the closely related branches of machine and deep learning. Big business is moving quickly to embrace AI to create better products at lower costs and to quickly provide valued-added data science.
Consider that in 2019, The Boeing Co. (NYSE:BA) expects to capitalize on an AI initiative it launched a little more than two months ago in order to make further inroads in advanced computing for commercial and government clients.
Hewlett Packard Enterprise Co. (NYSE:HPE) says AI is becoming a critical component of how every company in the U.S. intends to migrate to digital platforms. The company forecasts that by the end of 2019, AI will fuel 41% of those transformations.
No wonder a recent study by Accenture found that in 12 advanced economies with combined GDPs of roughly $61 trillion, AI can double economic growth by 2035. Part of that bump will come from a 40% boost in productivity.
Plus, AI will really join forces with another critical technology for the U.S. economy – cloud computing – in 2019. MarketsandMarkets says AI-as-a-service (AIaaS) will be a big driver of a market that will grow more than 36% a year, and be worth $190.61 billion, by 2025.
And AI’s uses don’t stop there.
For instance, my Money Morning colleague Tom Gentile deploys it to identify trading patterns that are invisible to human eyes – not to mention every other computerized trading platform on the planet.
Tom’s system looks at 11.7 million trading signals per day to come up with what he calls “double your money” trades every day the markets are open.
Luckily, you don’t have to understand what’s under the hood of Tom’s system – which, by the way, was designed by world-renowned rocket scientists – to take advantage of it.
All you need are your clicking finger and five minutes a day. Take a look here to see what I’m talking about.
Fort Silicon Valley Catalyst No. 4: Automated Systems
After nearly 10 years of testing and 5 million miles of driving, Alphabet Inc. (Nasdaq:GOOGL) is ready to disrupt the family car as we know it.
Google’s autonomous car unit, Waymo, will launch a robo-taxi service in Phoenix in a matter of months. It’s a big win for Google, which met with wide skepticism when it headed down this road in 2009.
To be sure, the firm’s self-driving automobile, Waymo One, will have a limited release. But after this shakedown period, Waymo One will cover metro Phoenix, and then other large cities where mobile ride-hailing has become popular.
There’s a lot more going on here than a proof-of-concept. Fact is, a lot of money hangs in the balance.
Intel Corp. (Nasdaq:INTC) and Strategy Analytics predict that driverless cars will have a total economic value of $7 trillion by 2050. That forecast assumes that nearly all of the 75 million cars produced around the world will have autonomous technology.
But that’s only a part of the story. Fact is, autonomous devices are all around us and gaining ground. One key driver comes from demographics – there are now more jobs open than there are workers to hire as baby boomers retire more quickly than millennials can take their place.
The global robotics and automation sector will be worth $135 billion this year, according to a forecast from IDC. And Statista believes that market will hit $498.6 million in 2025.
Clearly, tech is absolutely brimming with exciting opportunities for 2019.
These four Fort Silicon Valley Catalysts will not only block us from a recession, but prepare us for a tech rebound fueled by long-term trends worth trillions of dollars.
Each presents us with an opportunity to capture big profits for years to come. That’s why I intend to jump on as many as possible so we continue to grab market-crushing winners in 2019.
I’m not using the R word anymore. I’m kicking things off with the M word – money.
Now this isn’t all I have to say about investing in 2019. In fact, late last week I recorded an appearance on the Money Life with Chuck Jaffe podcast. In our conversation, I told Chuck where I think tech stocks are right now – and I laid out what factors I look for in choosing the right stock in these sorts of conditions, how to make money whether the market is going up or down, and what opportunities lie ahead for 2019.
Check it out…
Plus, I just finished up an in-depth Q&A session with Money Morning Executive Editor William Patalon III about my outlook for the New Year – and a lot more. If you know Bill from his writing or video appearances, you know we packed a lot of actionable info into our conversation.
I plan to send that to you on Friday, so look for it then. Meanwhile…
I wish you all a joyous and prosperous New Year’s!