3 Sectors to Avoid Even in a Booming Economy

Larry Ramer

Wed, Jan 31, 2024, 6:36 PM 4 min read

In 2023, economist and longtime S&P 500 forecaster Ed Yardeni would say that we were in “a rolling recession.” This was due to the Federal Reserve’s interest rate hikes. It’s true that some sectors, such as real estate brokers, solar energy, and regional banks, had more than their share of problems last year. This was due to elevated rates. On the other hand, I believe that there are almost always sectors which are struggling. So, even though the economy is now booming, there are certainly sectors to avoid.

Newspapers, for example, have struggled mightily since the advent of the internet. One could argue that they’ve never recovered from the launch of radio and TV. Furthermore, on the macro front, it’s clear that property and casualty insurers are taking significant hits from climate change. Here are three of the worst sectors in which to invest now, in my opinion.

Oil Stocks

Source: Shutterstock

There have been many attacks of Iran’s proxies, the Houthis, on shipping in the Red Sea. However, this has not caused oil prices to climb. The United States has indicated that it’s preparing to attack Iran in retaliation for the killing of three American soldiers. However, this did not trigger much of a reaction by oil prices.

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Last year, plug-in hybrids and EVs together accounted for nearly 9% of U.S. auto sales. That figure is expected to jump to 13% this year amid the surging popularity of plug-in hybrids. Globally, 13.6 million vehicles were sold last year.

Moreover, for the first time, large electric SUVs and pickup trucks are starting to become somewhat popular in the U.S., with Rivian (NASDAQ:RIVN), Ford (NASDAQ:F), and Tesla (NASDAQ:TSLA) selling significant numbers of these vehicles.

Meanwhile, Israel and Hamas appear to be close to reaching a long-term cease-fire deal. Such an agreement would likely cause the activities of other Iranian proxies in the Middle East to decline sharply and put significant downward pressure on oil prices.

Those who are bullish on oil stocks and oil prices should ask themselves this question: If oil prices don’t rise much when much of the Middle East is in conflict, when will they rise?

Health Insurers

A health insurance claim form with a stethoscope, a calculator, and several hundred dollar bills resting on top.

Source: Valeri Potapova / Shutterstock.com

It appears that the rising cost of healthcare in general and drugs in particular is starting to weigh on the profitability of health insurers.

One of the largest companies in the sector, Humana (NYSE:HUM), unexpectedly reported a Q4 loss as its bottom line was weighed down by higher higher medical costs, and the firm expects the trend to continue for all of 2024.

“Humana believes the emerging trends are impacting the industry broadly,” the company stated.

Indeed, UnitedHealth (NYSE:UNH) spent 85% of its revenue on medical care last quarter, way above the 82% level from 2022. Consequently, its shares sank, even though it delivered stronger-than-expected Q4 results overall.

With an expensive, new Alzheimer’s drug emerging and costly, new weight-loss treatments becoming popular, along with America’s population continuing to age quickly, I expect health insurers’ medical costs to continue to climb going forward.

Cable TV Companies

A remote being held and pointed at a black flatscreen tv with two potted plants on either side

Source: shutterstock.com/Gaurav Paswan

“Traditional pay-TV providers lost around 6 million pay-TV subscribers each year from 2019 to 2022,” according to Liechtman Research. Furthermore, the trend shows no sign of slowing, as the sector shed another 4.5 million net customers in the first nine months of 2023.

Of course, most “pay TV providers” are cable companies.

Also noteworthy is that these firms—Warner Bros. Discovery (NASDAQ:WBD), Paramount (NASDAQ:PARA), Comcast (NASDAQ:CMCSA), Charter Communications (NASDAQ:CHTR), and Disney (NYSE:DIS)—are being hit by other trends as well.

Warner Bros. Discovery, Paramount, Comcast and Disney are having trouble competing effectively with Netflix (NASDAQ:NFLX) and generating profits from their streaming businesses, while Comcast and Charter are being undermined by Verizon’s efforts to expand its home internet business in recent years.

Given these points, I certainly view cable TV as one of the sectors to avoid at this point.

On the date of publication, Larry Ramer was long RIVN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.