An article in Bloomberg offers ideas from a panel of experts regarding where to invest $10,000 in today’s financial markets. “It’s a challenging period, ” the article contends, “and an opportunity. The market’s inevitable cycles however painful, are made for disciplined investors.”
The experts recommend investments “ranging from digital payment companies to bargains in Japanese and Korean equity markets to high-dividend consumer staple stocks and long-dated U.S. Treasury bonds.”
Here are some highlights:
- Russ Koesterich, portfolio manager, BlackRock Global Allocation Fund, points toward Asia, where equities “appear really cheap.” He says that today’s discount can “arguably be attributed to three trends: stellar U.S. earnings growth, a stronger dollar as a headwind for emerging markets, and rising trade frictions.”
- Sarah Ketterer, chief executive officer and fund manager at Causeway Capital Management, says that undervalued stocks may “finally reign over growth stocks.” Valuation spreads are wide, she argues, which over history has “typically led to a narrowing of the gap and subsequent outperformance of cheap stocks.” She cites the global consumer staples sector as a source of cheap, high-dividend-yield stocks.
- Ian Harnett, chief investment strategist at Absolute Strategy Research, suggests going long on U.S. Treasuries which, he says, “have seen a perfect storm” recently but adds that the expectation of rising prices now makes those Treasuries with yields above 3 percent attractive.
- Jim Paulsen, chief investment strategist at the Leuthold Group, says that, while “it’s not yet time to exit the stock market, it’s time to focus more on defense.” Although yields are rising, he says, “balanced investors should reduce their equity allocations in favor of bonds,” and suggests that investors consider “selling some of those popular technology and consumer discretionary winners and moving toward an overweight in defensive equity sectors including utilities, consumer staples and real estate.”
- Jim Hamel, portfolio manager at Artisan Global Opportunities Fund, holds a long view that stretched valuations don’t preclude “finding solid franchises that are well-positioned relative to a meaningful secular trend,” adding that his firm is paying attention to the “ongoing global transition to digital payments.” Hamel sees tailwinds in e-commerce growth, the uptick in cross-border transactions and “technological innovations that simplify cash transactions.” Hamel also notes that emerging economies are encouraging their populations to join the “formal economy”, using the example of India’s attempts to demonetize.
- Joe Davis, global chief economist and head of investment strategy at Vanguard Group, asserts that the Fed’s plan to continue raising rates doesn’t necessarily spell trouble for bonds. “While rising short-term interest rates may sting,” he says, “these losses will be offset by higher future returns as interest payments are reinvested at higher yields.” He suggests sticking with stocks through market cycles to “take advantage of discounts in the market and benefit from their potentially higher returns over the long term.”