6 Investments to Absolutely Avoid Today (and at Least Until 2025)

6 Investments to Avoid Until 2025

With a sharp increase in volatility (+37% in the last month) and the upcoming US presidential elections, it is crucial to be aware of the 6 investments to absolutely avoid today (and at least until 2025).
Despite the S&P 500 and Nasdaq showing gains of 15% and 14% respectively since the beginning of the year, the outlook remains uncertain.

In this context of economic uncertainties, persistent inflation, and high interest rates, choosing wisely where to allocate your capital is crucial to protect your portfolio.

Avoid These Types of Investments:

1) Consumer-dependent Company Stocks

Companies operating in consumer-dependent sectors, such as travel and leisure, may face significant challenges in the coming years.
Persistent inflation continues to erode consumers’ purchasing power, making goods and services increasingly unaffordable.

The growth rate of EPS in the second quarter is a concern for both essential and discretionary consumer goods sectors, at the lowest level in the past two years.
Geopolitical events like the conflict in Israel and Gaza further complicate the situation by increasing global uncertainty, discouraging travelers, and reducing the demand for leisure experiences.

This combination of factors, along with the possibility of unexpected global crises, could put a strain on the travel and leisure sectors.
Given the rising costs of luxury goods and recreational activities, coupled with a volatile economy, investments in companies in these sectors may prove unprofitable in the near future.
Protecting your portfolio becomes essential by avoiding investments that could incur significant losses.

2) Low-Quality Stocks

Investing in low-quality company stocks can pose significant risks, especially in an uncertain economic environment.
Companies with weak balance sheets, ineffective debt management, and unclear growth strategies are particularly vulnerable.
During recessions, these companies are at a higher risk of losing value, especially if they have inadequate management or fail to innovate.

It is essential to avoid investments based solely on short-term performance or superficial valuations.
For example, Procter & Gamble represents a high-quality company model, with a diversified portfolio and a solid reputation.

Investing in low-quality companies without careful analysis can seriously compromise your portfolio’s performance.

3) Real Estate Stocks and REITs

The US real estate market is currently in a stagnant phase, with challenges that may persist until 2026 or beyond, according to Bank of America economists.
High-interest rates have made financing new real estate projects particularly expensive, contributing to a devaluation of properties in some areas and a persistent housing shortage.

One of the main complicating factors is the “lock-in effect,” which keeps many homeowners stuck in their current properties.
Refinancing and mortgages obtained at ultra-low rates during the pandemic make relocation unattractive due to current high rates.

This phenomenon limits the supply of houses on the market, further exacerbating the shortage of available properties.
Pending home sales have hit an all-time low, and Bank of America predicts that new construction starts will remain stagnant in the coming years.

Given this scenario, investments in real estate stocks and REITs, especially those focused on industrial structures and data centers, may not offer the expected returns and present significant risks.
Investors should carefully consider real estate market dynamics and interest rates to avoid long-term losses.

4) Non-AI Technological Stocks

The technology sector is experiencing a period of great ferment, especially thanks to innovation in artificial intelligence.
However, technology companies not involved in this emerging field may face significant challenges.

The high valuations of these companies and unmet growth expectations can lead to significant corrections in their values.
In a context where AI is driving innovation and progress in the sector, technology companies that fail to integrate these new trends risk falling behind.

The overall economic situation adds further concerns: high-interest rates and global uncertainties can negatively influence the valuations and performance of non-AI technological stocks.
Investing in companies that fail to innovate or adapt to market trends could be particularly risky.

5) US Bonds

US corporate bonds, especially those issued by companies with lower credit ratings, continue to be largely on sale, with around 70% traded at a discount, i.e., at prices below $100, although this represents an improvement from the 95% in October 2023.

This phenomenon is the result of the Federal Reserve’s interest rate hikes to combat inflation, which have made existing bonds less attractive and led to a loss of value.
While high-yield bonds offer higher interest rates, they also carry a higher risk of default, especially in times of economic crisis.

Investors should be cautious in including long-term or high-risk bonds in their portfolios, considering the potential risks in an uncertain economic environment.

6) Cryptocurrencies and Volatile Stocks

Finally, cryptocurrencies and speculative stocks represent high-risk investment categories.
The lack of regulation and decentralized nature of cryptocurrencies can lead to extreme value fluctuations influenced by market speculation and sentiment.

Moreover, speculative stocks often rely on hype and unrealistic expectations, which can lead to significant losses when the market corrects itself.
While the rise of Bitcoin (+60% since the beginning of the year) may entice investors, it is advisable not to put a significant portion of their capital into these volatile assets due to their uncertain nature and associated risks, which can seriously compromise portfolio stability.