RBC: 7 Structural Themes Long-Term Investors Must Take Seriously

myles zyblock rbc strategistMyles Zyblock

Photo: Bloomberg.com

Investors have lot to think about these days as the media constantly bombards them with headlines.Much of these issues tend to be on matters that are generally short-term in nature.

But investors really should keep the long-term picture in mind as well, if not more so.

In a recent volume of his U.S. Equity Strategy Weekly report, Myles Zyblock identified seven structural (ie multi-year) trends and ideas.

“[I]t’s critically important for investors to differentiate between cyclical and trend strategies, as these operate on substantially different horizons,” wrote Zyblock, Chief Institutional Strategist for RBC Capital Markets.

P/E ratios will trend lower due to demographics

'P/E compression, which began in 2000, is not over: Demographic trends, those being the decline in peak- versus early-earnings cohorts, argue for another five years of multiple compression before the bottom sets in.'

Source: RBC Capital Markets

Throw out the Fed model: The relationship between stocks relative to bonds will break down.

'It is too early to fear a rise in interest rates: An increase in 10-year Treasury yields, assuming it is not being driven by an escalation in sovereign risk, is empirically consistent with higher multiples up until the point that yields surpass 5%.'

Source: RBC Capital Markets

The S&P 500 will lead the way

The next phase for Tech seems like a positive re-rating

'Stay long the innovators: Tech sector leadership, which started in late 2006, is in its middle innings with the next phase likely to be characterised by strong fundamental delivery and relative P/E expansion.'

Source: RBC Capital Markets

A challenging outlook for the Consumer Discretionary due to already high profit margins

'A troubling outlook for Consumer Discretionary: Today's incredibly high margins foreshadow a very challenging 3--5 year earnings growth profile for the sector.'

Source: RBC Capital Markets

The merits of dividend paying stocks are high

'Income provides a high-odds path to long-term success: Dividend investing is among the most robust risk-adjusted long-term leadership ideas we have ever uncovered.'

Source: RBC Capital Markets

Large cap stocks will be much more attractive than small cap stocks

'Shift some money into large caps: Small caps are expensive, embed extremely optimistic forward earnings expectations, and are at greater risk of potential capital gains tax rate increases in 2013.'

Source: RBC Capital Markets

Now, here are some stock picks

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.