Only Sector Creating Jobs and Long-Term Growth Opportunities
By John Whitefoot for Daily Gains Letter | May 30, 2013
Investors interested in making long-term investing commitments in the face of an irrational, Federal Reserve–enhanced bull market need to consider the facts. Sure, the markets are running higher, but it isn’t on sound economic policy.
U.S. unemployment remains stubbornly high, as does personal debt. U.S. wages are stagnant, and first-quarter U.S. gross domestic product (GDP) growth came in well below the expected expansion rate. Of the S&P 500 companies that have issued corporate earnings guidance for the second quarter of 2013 so far, almost 80% have issued a negative outlook.
It’s fair to say the run-up on Wall Street has more to do with the Federal Reserve’s $85.0-billion-per-month quantitative easing policies and artificially low interest rates than it does an economic rebound.
Still, there are potential investing areas that even the Federal Reserve can’t touch. Case in point: no matter what happens on Wall Street, over the next 18 years, roughly 10,000 Americans will turn 65 every single day.
And over the next 20 years, they will each spend $142,000 in medical expenses, though that estimate is an average number and does not include long-term care costs that some retirees may incur. Or at least that’s according to a recent study that examined commercial data from 2002 through 2010 and Medicare data claims from 2006 through 2010. (Source: Yamamoto, D.H., “Health Care Costs—From Birth to Death,” Health Care Cost Institute web site, May 2013.)
Not surprisingly, the study found that the amount of health care a future retiree will need varies by their current age and life expectancy. If you retire at 55, you’ll spend about $372,400 ($744,800 for a couple) out-of-pocket on health care if you live to age 85. A person retiring at age 65 will spend $146,400 on health care (or $292,800 for a couple) if they live to age 85.
While these numbers raise all sorts of questions about how much we will each need to squirrel away at different points of our working lives to meet this need, it also shows that there will be a large amount of out-of-pocket money flowing into the health care sector over the next two decades.
For investors looking to make money off the aging baby boomer population, the health care sector may be a good place to start. Some health care sector stocks to consider are AmSurg Corp. (NASDAQ/AMSG), an operator of ambulatory surgery centers; HealthSouth Corporation (NYSE/HLS), one of the nation’s largest rehabilitation services providers; and The Ensign Group, Inc. (NASDAQ/ENSG), an operator of senior living facilities.
According to the Bureau of Labor Statistics, the health care industry continues to create jobs at a steady pace, adding 19,000 newly employed in April. This brings the 12-month average for job creation in the healthcare industry to 24,000 per month. (Source: “The Employment Situation – April 2013,” Bureau of Labor Statistics web site, May 3, 2013.)
With unemployment still high and U.S. economic growth relatively weak, health care will continue to present investors with a number of great long-term opportunities.
Tags: bull market, corporate earnings, Federal Reserve, interest rates, job creation, quantitative easing, S&P 500, Wall Street