Investors seeking profits in the frothy bull stock market and looking for places to stash them, may want to consider a few safe haven investment ideas, other than the typical cash and fixed income securities. These defensive investments include infrastructure-related funds, data-center real estate investment trusts, various ETF strategies, telecom stocks, actively managed debt funds, cheap European equities, gold and other assets, as outlined by Barron’s. The strategies were recommended by a group of respected investors.
Five big veteran investing experts below share some of their best ideas for where to put your money in the current environment. Bloomberg Intelligence ETF analyst Eric Balchunas adds suggestions for how to use ETFs to play on the ideas presented.
Causeway Capital's Ketterer
Sarah Ketterer, global chief economist and head of investment strategy at Causeway Capital Management, criticizes investors in the long-running bull market for chasing growth and not paying enough attention to valuation. Rather than buying market winners, warning especially against those in traditionally defensive sectors, she recommends “unpopular telecommunication stocks,” many tracked by the iShares Global Communications Services ETF (IXP).
She likes Asian telco companies in particular, given larger countries in the region tend to have just a few competitors controlling a majority of the market and benefiting from favorable regulation. She adds that several of them trade at extremely low valuations.
Russ Koesterich, portfolio manager at BlackRock Global Allocation Fund, makes the case for international diversification. He cites European equities as a surprising “bright spot.”
“While there are challenges, including structurally lower growth, there are several factors favoring European equities: valuation, dividends, low growth expectations, the composition of the index and finally, the European Central Bank (ECB),” he wrote, noting that the ECB is likely to extend its stimulus.
Balchunas recommends the iShares Core MSCI Europe ETF (IEUR) to play on this theme.
Absolute Strategy’s Ian Harnett
Ian Harnett is the chief investment strategist at Absolute Strategy Research. He says his team worries that “comfortable complacency” in the current environment will “unwind in the coming quarters as investors realize that both equities and bonds cannot be right.”
Rather than “investing directly in declining bond yield,” Harnett recommends buying infrastructure-related funds, also set to benefit from any domestic fiscal initiatives, or data-centre real estate investment trusts. He also likes gold.
Joe Davis, global chief economist and head of investment strategy at Vanguard Group, urges investors who can tolerate increased risk to consider active strategies. Balchunas recommends that investors seeking a more active stance through ETFs look at the PIMCO Enhanced Low Duration Active ETF (LDUR), which rebalances monthly and has an expense ratio of 0.40%
Sierra Mutual Funds’ Spath
Terri Spath, the chief investment officer at Sierra Mutual Funds, tells investors to target emerging market debt as the “confusion in financial markets has, and surely will, contribute to further uncertainty and volatility.”
She notes that while emerging markets equities have lost money over the past year, as measured by the iShares MSCI Emerging Markets ETF (EEM), EMD is up more than 10%, as measured by the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB). “More return, less risk,” added Spath.
These recommendations come as the $338 billion Deutsche Bank Wealth money manager says it's time to protect profits by cutting equities to 40% from 50% of portfolios. Various headwinds, including U.S. China trade wars, tensions with Iran, and slowing global economic growth, could further dampen sentiment, dragging the S&P 500 down from its 2019 all-time highs. In this case, investors will be happy that they cashed and reallocated at the height of the frenzy.