Global Macro: Energy & Health Care Ripe

June 26, 2014

Panelists at’s Global Macro ETF Strategist conference talk about the sweet spots they see.

Investors have been grappling with headline-driven markets since the 2008 crisis, responding to political uncertainty in Washington and geopolitical headlines involving escalating tensions in Iraq, the South China Seas and terrorist activity in Nigeria.

That said, advisors are bullish on opportunities in the heated health care, energy and—given China’s continuing importance in the global economy—base metals, notably aluminum.

Perhaps the biggest headline risk currently lies in the South China Seas, where China is stoking its Asian neighbors, including Vietnam and the Philippines, into disputes over maritime rights.

“I think geopolitical risk is enormous and growing,” said David Kotok, chief investment officer at Cumberland Advisors, during a panel discussion at the Global Macro ETF Strategist conference in New York this morning.

Fellow panelist Dennis Gartman, publisher of the Gartman Letter, said he’s very worried about “hot-headed” 28-year-old South Seas sailors manning naval ships and bumping into each other, further ratcheting up tensions between the countries.

Gartman also said he’s worried about the Islamic terrorist group in Nigeria currently responsible for kidnapping girls in the countryside, possibly affecting the country’s production of crude oil if the group decides to ratchet up its terrorist attacks.

“How do we hedge against that? I haven’t the faintest idea,” said Gartman.

Bullish On Aluminum

However, Gartman was certain on one investment idea: aluminum. He explained that with the combination of China expecting to become one of the world’s largest buyers of cars within the next 20 years, and the Environmental Protection Agency’s ongoing constraints on fuel economy, carmakers will have to adapt to demands from both sides by using lighter materials, specifically aluminum.

Kotok said the energy sector will be a growth sector for investors for the next two decades and is investing in that sector via Energy Select SPDR (XLE | A-95), which he said captures a piece of the energy sector as well.

Jim Lowell, chief investment officer at Adviser Investments, said his firm is currently overweighted in the healthcare space because of innovation in the biotech sector as well as robust mergers and acquisition activity within the space.

Lowell also said that demand for better health care in the emerging markets has “great trajectory” going forward.

Bullish On Modi’s India

Within the emerging markets, Steve Cucchiaro, CIO of the world's largest ETF strategist, Windhaven Investment Management, which is managing over $18 billion in assets, said he’s currently bullish on India.

“India is a very interesting place right now,” said Cucchiaro. There’s been a lot of speculation about the election and how Prime Minister Narendra Modi would come in and it would not be business as usual, and there would be structural reforms. If there’s ever a place that has so much potential and so much room for improvement in infrastructure and so many other things, you have to say India is that place.”

Cucchiaro also noted that India’s latest central banker, Raghuram Rajan, is “well-regarded central banker” who, along with Prime Minister Modi, will serve to give India more credibility in the eyes of global investors.

In developed markets, Cucchiaro also mentioned that his firm is currently bullish on ETF that have exposure to large-cap U.S. equities and the Nasdaq 100 Index, real estate investment trusts and divided appreciating stocks.

He’s also bullish on hedged Japanese equities ETFs, and ETFs that have exposure to U.K. and German equities. He declined to name specific ticker symbols citing firm compliance policies.



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