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Tech/Biotechonlogy and emerging Tech/Material (Nanotechology) as Defesive Stocks in an Economic downturn.

Posted by Adrian on January 11, 2007

What could be a possible uncertain economic year (if you can excuse all the buoyant up beat financial news coming out of the first two weeks into 2007!) I have forecast for a recession for middle/end year in the US as the housing market drags the rest of the economy into a recession. Late 2006 into early 2007 the stock markets have been rallying extremely well with record breaking highs, at this point the Dow is at 1224.16.  So There is obviously a lot of money still being invested into the stock markets. Commodities have declined, and oil is $54 a barrel.

If we see a reversal or a downturn (and it’s most likely), and consumer confidence does decline across the board – and we may see high unemployment rates. Mixed with the possibility of the Fed cutting rates early and inflation starting to become a major issue for the Fed and the Fed chairman Ben Bernanke; the markets might get the jitters. Stocks will move around. Defensive stocks such a utilities and non business cycle or cyclical stocks may be favorable with an economic downturn. I believe the biotechnology and tech stocks will be looked at again, and more specifically as defensive stocks, which will also included emerging technology stocks and material/industrial stocks such as nanotechnology.

If there is a downturn in consumer consumption of computer products, we may see an increase in the hardwear or innovating side of technology, data storage, micro chip technology, biometric technology, performance based monitoring technology.

A brief explaination of Defensive Stocks is found here.


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