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Nobody knows what is going to happen the rest of this month, much less what will happen over the next decade.
Fried.
There are some important risks to consider in this approach. Technology companies have historically dominated long-term market returns because of their high margins, rapid innovation, and network effects that allow earnings to compound faster than capital-intensive sectors like energy, utilities, and infrastructure. Energy markets are highly cyclical, meaning periods of oversupply or weak demand can significantly hurt returns, while utilities operate under regulatory constraints that limit profitability even when demand rises. Infrastructure funds such as PAVE and GRID also depend heavily on government spending cycles and capital investment trends, which can fluctuate with political priorities and interest rates. If inflation stays low, interest rates fall, and AI-driven productivity significantly boosts technology earnings, the Nasdaq may continue to outperform over the long run, leaving energy, utilities, and infrastructure to deliver solid but more moderate returns. Compared with technology stocks, energy and infrastructure generally trade at lower valuations and offer stronger cash flows and dividends, which could attract investors if inflation remains elevated or capital rotates away from expensive growth stocks.
Chief
How would we know which stocks or sectors would outperform in the future?
No idea
Chief
While it's theoretically possible to get lucky, in the aggregate thematic ETFs are like lighting money on fire.
Morningstar found that on average the real experience of thematic ETF investors, including their significant timing gap, underperforms holding the index by over 15% per year.
You read that right.
https://www.morningstar.com/funds/chasing-thematic-etfs-returns-has-set-investors-up-fail
In the financial cycle, this isn't naiveté; it's a game of mean reversion. To determine whether they can outperform the Nasdaq (QQQ) or S&P 500 (SPY) over the next decade, we need to dissect two core drivers: the capital expenditure cycle and valuation anchors.
The insightfulness of your thinking depends on your assessment of the following two factors:
Total Factor Productivity (TFP): The Nasdaq represents a technology premium. If AI truly delivers an exponential increase in productivity, then tech stocks' profit growth will still far surpass that of infrastructure stocks. Infrastructure and energy are asset-heavy and highly leveraged, and persistently high interest rates erode their profits more severely than those of tech giants.
Return on Equity (ROE): Utilities (XLU) are subject to strict government regulation, limiting their profit margins; PAVE involves numerous government projects, typically resulting in thin profit margins. Tech stocks, on the other hand, possess near-zero marginal cost expansion capabilities.