Our financial system lies in shambles, and the dominoes continue to fall, bringing down companies and stocks in one sector after another.  Consumer confidence is absolutely terrible.  Friends who previously asked about my market opinion simply as a common courtesy now ask because they’re genuinely worried about their own retirement funds … and about the future of America.

And what do I tell them?

“This too shall pass.”

I tell them America is a country with great and diverse assets, and that while the stock market may have lost more than 40% of its nominal value from peak to trough, the actual loss of real value in our net worth is far smaller.  Plus, many companies now have far better balance sheets!

Of course, a lot of people don’t think about balance sheets, they think about revenues and earnings.  That was one factor in building the recent bubble.  In the future, I believe a little more attention to the balance sheet will be a good thing.

I also believe that the big bear market we’re likely leaving behind has provided a perfect opportunity for investors to clean house, to jettison the stocks of tired old companies and to invest in the leaders of the next bull market when it arrives.

Four sectors in particular are on my mind.

Four Sectors for the Future

The first is alternative energy, for all the obvious reasons.  Both parties have been making supportive noises and the Democrats in particular can be counted on to advance numerous initiatives in solar power, wind energy, electric cars and more.

And because the industry is still very young and small, relative to the oil industry, the growth potential is enormous.

Cabot did well investing in the solar power industry back in 2007 and we’ve been sitting on the sidelines watching the stocks correct this year, even as the companies continue to make good progress.  In an upcoming issue of Cabot Wealth Advisory, I’ll give you a complete rundown on the solar stocks.

But the stocks don’t look good yet.  The selling pressures that followed the gains of 2007 are still holding the stocks down, and there’s no telling how long this will go on.  Bottom line: you shouldn’t invest in these stocks until investors start pushing them up again.

The second sector I’m looking at is the government … for the simple reason that it’s one of the few sectors that are growing today.  Furthermore, it looks as though the trend toward increasing government involvement in our lives may continue, bringing us a system somewhat closer to those in France and Germany.  Some people applaud the change, some don’t.  I say acknowledge it so you can invest accordingly.

As we move inexorably toward universal coverage of health care, for example, the government’s role in that industry will increase, and there will be winners and losers among the public companies that supply goods and services in the industry.

Which brings me to my third sector, health care.  Health care is already huge; it accounts for nearly 20% of our national economy.  So there’s no way it can boom like the alternative energy industry.  On the other hand, the aging of the big baby boom generation means naturally increased demand for services.  Furthermore, there are some hot spots in the industry where money is flowing fast and where fast-growing companies offer tempting investment prospects.

Genetics is one.  We’ve written about several genetic technology companies in recent months, both here and in Cabot Top Ten Report.

Cancer is another.  Any company that can cure–or even better, prevent–cancer will see its shares shoot to the moon.

Infection control is huge, as well.  It’s a simple problem, yet the most widespread of all.  And the new insurance rules that deny payment to hospitals for their mistakes (like infections contracted during surgery) are excellent incentives for progress here.

The fourth sector is simply this … securities that pay good dividends.  Dividends, you see, have been neglected in recent years.  Investors haven’t craved them, and companies that could have paid them haven’t.  Apple (AAPL), for example, has $25 billion in cash and has not yet chosen to institute a regular dividend.

But the recent bear market means that more companies will be thinking about increasing their dividends to make their stocks more attractive, and that those that don’t, like Apple, might consider instituting them.

It also means, of course, that investors like you are hungrier than ever for safe investments that can provide regular income.  And the best place to get advice on dividend-paying investments is Income Digest, our monthly newsletter from the editors of Dick Davis Digest.