Uncertainty is likely the dominant topic for the economy and markets through the end of 2022. It can also be challenging to decide where to invest your money due to the lack of clarity. Therefore, if you're looking for investment ideas, it's worth looking at where these experts Bloomberg interviewed are currently investing.
Idea #1: Energy infrastructure
The energy infrastructure stocks that Tiedemann Advisors thinks will profit from the move away from higher-carbon energy sources like coal have been given more attention. They consist of businesses that help transport energy, such as renewable energy companies, as well as so-called midstream energy firms that operate natural gas pipelines and energy storage facilities.
According to Tiedemann, many of these businesses pay out enticing dividends, trade at a discount to the larger US stock market, and offer growth that is comparable to that of the broader market but more stable (given that energy is essentially a necessity).
Which ETFs offer a good starting point?
Broad access to a group of 15 stocks that meet the criteria is provided via the L&G US Energy Infrastructure MLP UCITS ETF (ticker: SOLEIMLP; fee ratio: 0.25%). Additionally, you might want to think about the iShares Global Clean Energy UCITS ETF (INRG; 0.65%) if you want exposure to renewable energy.
Idea #2: US local government bonds
This notion, which originates from WE Family Offices in New York (a separate entity from WeWork), aims to profit from the current financial uncertainty by suggesting that investors would be wise to take advantage of the security provided by local government bonds. Instead of the federal government, local US government bodies have issued these bonds.
Given the funding they received from the pandemic, the increase in sales taxes from the subsequent boom in consumer spending, and the rise in property taxes due to rising home prices, WE sees state and local governments in enviably good financial shape. Additionally, the IRS treats the income you can earn from these bonds favorably, increasing your returns.
Which ETFs offer a good starting point?
To get you started, two of the largest ETFs are the iShares National Muni Bond ETFs (MUB; 0.07%) and the iShares National Muni Bond ETF (VTEB; 0.05%). There are many ETFs to choose from depending on exactly how you might want to play it.
Idea #3: European and Japanese stocks
Specifically in Europe, Japan, and emerging markets, Clocktower Group believes that a slowdown in interest rate increases in key developed nations and a potential pick-up in China's economic development next year could be a formula for success for stocks outside of the US.
The California-based Clocktower likes exposure to industrials, commodities, copper, and oil from a sector standpoint. The company is placing its hopes mostly on South Africa, Indonesia, and Latin America among rising markets.
Which ETFs offer a good starting point?
Vanguard FTSE Europe ETF (VGK; 0.08%), iShares MSCI Japan ETF (EWJ; 0.5%), and iShares MSCI Emerging Markets ETF (EEM; 0.68%) offer exposure to European, Japanese, and emerging markets stocks, respectively. And for exposure to the specific emerging markets highlighted, iShares MSCI EM Latin America UCITS ETF (LTAM; 0.74%) covers Latin America, iShares MSCI Indonesia ETF (EIDO; 0.57%) covers Indonesia, and iShares MSCI South Africa ETF (EZA; 0.57%) covers South Africa.
Idea #4: US stocks
RBC Brewin Dolphin prefers US markets due to the macroeconomic prognosis for 2023. It is wagering that the country's interest rates will peak in the first quarter of the next year, and that when investors start preparing for rates to decline once more, the US currency would depreciate against other currencies, boosting the revenues of US corporations.
However, not all US stocks are created equal; RBC favors "quality growth" and "quality income" firms. By quality, RBC is referring to how much cash a business has available to survive an economic downturn and increased interest rates. The bank has identified a few businesses that suit the bill. In addition to Exxon, Home Depot, and Procter & Gamble, UnitedHealth, Visa, Microsoft, and Charles Schwab are included in RBC's quality growth basket.
Which ETFs offer a good starting point?
There isn't necessarily a single ETF that will lead you in the right direction because quality is a moving target for investors, but the iShares MSCI USA Quality Factor ETF (QUAL; 0.15%) is one of the largest and might be worth looking into. The S&P 500 Dividend Aristocrats ETF (NOBL; 0.35%) invests in US businesses that have increased their dividend payments for at least 25 years running.
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