Tyler Mordy, president/chief investment officer, Forstrong Global
This has been a long economic cycle, particularly for the U.S. At 8 1/2 years, it ranks third out of 33 cycles recorded since 1854. History shows that post-crisis periods, like the one since 2009, tend to be protracted affairs. This episode has been no different. Many economic engines, like those in the eurozone, are just starting to rumble.
These earlier-cycle countries are becoming the beneficiaries of the next phase of outperformance (moving away from America). Europe and Emerging Asia are the most likely candidates—regions with cheap currencies that are showing signs of earnings and economic acceleration and trade on much more favorable valuations.
In Europe, with encouraging economic momentum materializing and the risk of a eurozone breakup receding, the financial sector should be buoyed by improving consumer and business confidence, translating into a pickup in credit growth.
In China, investors naturally worry whether equity prices can keep rising even as the economy keeps slowing, but this is the wrong question. The most important facts about China today are the shift from exports and capital spending to consumer-led growth, improving margins and financial liberalization. Now’s the time to be investing in an unloved sector.
David Haviland, managing partner /portfolio manager, Beaumont Capital Management
- iShares U.S. Aerospace and defense (ITA)
- First Trust Dow Jones Internet index fund (FDN)
- O’Shares FTSE U.S. Quality Dividend ETF (OUSA)
- iShares MSCI Emerging Markets ETF (EEM)
- iShares MSCI All Country World Index ex U.S. (ACWX)
We have a positive outlook on three domestic equity ETFs. The first is ITA, thanks to its large, industrial-based constituents. It has both civilian and military products and services.
The second, FDN, owns companies that generate at least half of their annual sales and revenue from the internet. It’s fairly safe to say the internet is not going away, and that its use and proliferation is only going to increase over time.
Finally, OUSA’s process of selecting the highest-dividend-yielding equities is very similar to what our firm has been doing since 1981. The O’Shares selection process focuses on high-quality, lower-volatility and highly profitable companies.
On the international side, we still have positive outlooks for EEM and ACWX. U.S. equities have been outperforming their international brethren for years, but in 2017, equity leadership was overseas, which is a turnaround that we believe should last for years.
Contact Cinthia Murphy at [email protected]