Which Sectors Should Investors Avoid in 2019?

The new year is just 2 months old and many investors are wondering which industries are worth investing in and which industries rather than investors should be avoided.

As a rule, disillusionment always follows after every major hype. This is especially true when investors’ high expectations of an industry are not met.

Industries that investors should avoid in 2019

In recent years, these have included stocks of 3D printer manufacturers , which have brought such investors high losses, which have entered the hype phase. Following Canada’s release of cannabis cultivation, trafficking and distortion in October 2018, cannabis stocks were on the rise, with hype surrounding these stocks .

Cannabis Stocks – Will the Crash Follow After Soaring?

Stocks of companies such as Tilray, Canopy Growth and Aurora Cannabis were among the high flyers on Wall Street in 2018. The prices of these companies have multiplied within a few months.

Nevertheless, initial investment experts warn against exposure to cannabis stocks. The reason: the hype surrounding these papers was very high in 2018, with many investors expecting massively increasing sales and profits for this sector. In fact, some companies in the industry also delivered strong sales growth, but many analysts had expected even better results.

Companies like Aurora Cannabis can sometimes offer fantastic profit margins (selling price of $ 8.39 per gram, average cost $ 12.53), but that may not always be the case. Industry experts expect competition to increase over time and margins to fall sharply again. Cannabis shares could therefore be one of the industries in 2019 that investors should avoid.

Complicated environment: social media stocks

Social Media stocks like Facebook already had a tough time in 2018. The price of  Facebook has fallen from over $ 200 to less than $ 150. Especially in Europe, the authorities want to regulate data piracy such as Facebook stronger. New data protection laws continue to limit the scope of action of Facebook & Co. In addition, Facebook’s growth in Europe slowed noticeably.

Other social media stocks such as Twitter and Yelp are also struggling with weak user growth and poor sales figures. In short, this year could also be difficult for social media stocks – an industry that investors should probably avoid in 2019 as well.

2019 – a difficult year for bank stocks?

The banking industry generates its income from a combination of fees and interest. If interest rates rise, this will usually have a positive impact on credit margins, which will allow banks to generate higher returns.

The US Federal Reserve raised interest rates further in 2018, but in 2019 only 2 to 3 interest rate cuts could follow. Some market participants even expect interest rates to fall again towards the end of 2019 if the economy continues to cool.

Bank shares in Europe are already suffering from the low interest rate environment anyway. Although interest rates could pick up again in Europe in the long term, significantly higher interest rates are unlikely to be expected due to the high level of debt in many EU member states. Investors should therefore continue to avoid European bank shares in particular.

Conclusion: Banking, social media and cannabis stocks are only second choices in 2019

For investors, there are better investment opportunities in 2019 than investing the money in European banking stocks, social media or cannabis stocks.

In particular, the cannabis market is still very young, which could increase stocks in this sector in the short term. But investors should be aware of the risks associated with such high-risk investments. In the long term, investors in this market must expect consolidation.

The automotive market and the oil industry should also remain difficult if the economy continues to cool down. On the other hand, cybersecurity , cloud computing , health care and mobile payment offer opportunities .