Where To Invest As 2022 Winds Down, According To Industry Experts

Where To Invest As 2022 Winds Down, According To Industry Experts
Carl Hazeley

about 1 year ago4 mins

  • Tiedemann Advisors is leaning into energy infrastructure plays that are set to benefit from the transition to lower-carbon energy sources.

  • Clocktower Group sees stocks in Europe, Japan, and emerging markets as potentially attractive if interest rate hikes slow down and China’s economic growth picks up.

  • RBC Brewin Dolphin fancies “high-quality” US stocks, and WE Family Offices likes the look of the country’s local government bonds.

Tiedemann Advisors is leaning into energy infrastructure plays that are set to benefit from the transition to lower-carbon energy sources.

Clocktower Group sees stocks in Europe, Japan, and emerging markets as potentially attractive if interest rate hikes slow down and China’s economic growth picks up.

RBC Brewin Dolphin fancies “high-quality” US stocks, and WE Family Offices likes the look of the country’s local government bonds.

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If there’s a theme that’s emerging for the economy and the markets for the end of 2022, it’s probably uncertainty. And that lack of clarity can make it difficult to know where to put your money. So for inspiration, it’s worth checking out where these experts interviewed by Bloomberg are investing right now.

Idea #1: Energy infrastructure

Tiedemann Advisors has been taking a closer look at energy infrastructure stocks that it believes are set to benefit from the transition away from higher-carbon energy sources like coal. These include so-called midstream energy companies in natural gas pipelines and energy storage facilities – essentially companies that help transport energy – as well as renewable energy firms.

Tiedemann estimates that lots of these companies trade at a discount to the broader US stock market (based on valuation metrics like price-to-earnings ratios), pay attractive dividends, and offer growth that’s in line with the broader market but more with more stability (given that energy’s pretty essential).

Which ETFs offer a good starting point?

The L&G US Energy Infrastructure MLP UCITS ETF (ticker: SOLEIMLP; expense ratio: 0.25%) offers broad access to a basket of 15 stocks that fit the bill. And for renewable energy exposure, you might want to consider the iShares Global Clean Energy UCITS ETF (INRG; 0.65%).

Idea #2: US local government bonds

This idea – which comes from New York-based WE Family Offices (no relation to WeWork) – is looking to capitalize on the uncertain macroeconomic environment, arguing that investors would do well to benefit from the security offered by municipal government bonds. These are bonds issued by local US government entities, as opposed to the national government.

WE sees state and local governments in enviably good shape financially, given the cash they were handed through the pandemic, the rise in income via sales taxes from the boom in consumer spending that followed, and the increase in property taxes from rising house prices. What’s more, the income you can make on these bonds gets favorable tax treatment from the IRS, boosting your returns.

Which ETFs offer a good starting point?

There are lots of ETFs to choose from depending on precisely how you might want to play it but to get you started, two of the biggest are the iShares National Muni Bond ETF (MUB; 0.07%) and the iShares National Muni Bond ETF (VTEB; 0.05%).

Idea #3: European and Japanese stocks

Clocktower Group thinks a slowing down of interest rate hikes in major developed markets and a potential perking up in China’s economic growth next year could be a recipe for stocks outside the US to do well – particularly in Europe, Japan, and emerging markets.

From a sector perspective, the California-based Clocktower prefers exposure to industrials, commodities, copper, and oil. Across emerging markets, the firm’s focusing its bets on Latin America, Indonesia, and South Africa.

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

The macroeconomic outlook for 2023 has led RBC Brewin Dolphin to favor US markets. It’s betting that the country’s interest rates will peak in the first quarter of next year and that as investors start bracing for rates to come down again, the US dollar will drop versus other currencies, giving US companies’ earnings a boost.

But not all US stocks are created equal: RBC’s preference is for “quality growth” and “quality income” stocks. By quality, RBC’s talking about how much cash a company has on hand to weather an economic downturn and higher interest rates – and the bank’s lined up a few companies that fit the bill. UnitedHealth, Visa, Microsoft, and Charles Schwab sit in RBC’s quality growth basket, and Exxon, Home Depot, Procter & Gamble, JPMorgan, and PepsiCo sit in its quality income bucket.

Which ETFs offer a good starting point?

Defining quality is a moving target for investors, so there isn’t necessarily a single ETF that’ll set you on the right path, but one of the largest is the iShares MSCI USA Quality Factor ETF (QUAL; 0.15%) so that could be worth checking out. On the income side, the S&P 500 Dividend Aristocrats ETF (NOBL; 0.35%) houses US companies that have grown their dividend payments for at least 25 consecutive years.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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