Facebook LinkedIn Twitter How to talk to clients about GameStop Related news Share this article and your comments with peers on social media Keywords Investment strategies Geographical diversification is harder to come by, report says Jade Hemeon Will exuberant market sentiment last? Gold, natural gas, and U.S. defense stocks, along with long-term and floating rate bonds, are key areas of opportunity, says renowned global investment strategist Don Coxe, chairman of Coxe Advisors LLP of Chicago. Speaking Tuesday at a seminar sponsored by the CFA Society of Toronto, Coxe warned of the imminence of rising interest rates in the U.S. and rising global political tensions as an alliance between China, Russia and Iran gathers force. On the positive, side, Coxe is excited by the prospects of Narendra Modi as the new pro-business prime minister of India, after he won a clear majority in a landslide national election last month. Coxe also foresees continuing healthy growth in China. “Until recently, China saw growth at an annual rate averaging 9% for 30 years,” he said. “There is no precedent in history for that kind of economic growth. Now, growth has slowed to 7% a year, but that’s still huge and is based on a much larger economy. Growth in the U.S. is nowhere near that rate.” While the U.S. was supposed to have grown by 2.5% in the first quarter, the economy actually shrank by 1%, he said. > Increase bond exposure Coxe has been recommending that investors modestly reduce overweight exposures to U.S. stocks and increase bond exposure. He suggested extending the duration of bonds, which he says is a short-term trade, to protect against the possibility of financial market upheaval. “You need some long-duration bonds to protect against another financial crisis,” he said. “I’m not convinced the U.S. financial industry has totally cleaned up.” Looking out a little further, he said the U.S. is likely to raise interest rates at some point, providing there is growth in the global economy. To do well in this scenario, he suggested investing in floating-rate bonds, but stressed they must be high quality. He said the current price/earnings ratio of U.S. stocks, trading around 16 times earnings on average, may be in line with long-term valuations, but current growth rates are low by historical standards and stocks look expensive. If there is any rise in interest rates, the “carry trade,” whereby large financial institutions are able to borrow short-term money and invest at a higher rate in dividend-paying stocks, will no longer be profitable. A resulting reduction in margin buying could trigger a market decline, he warned. “Increasing margin debt and a rise in the S&P index go together like Fred Astaire and Ginger Rogers,” Coxe said. “The current positive carry, even on low-dividend stocks, is primarily helping only the top 1% in the U.S.” > Natural gas While Coxe recommends some gold exposure as a form of portfolio insurance in the case of escalating political and financial risk, his favorite commodity is natural gas, for which he sees growing demand from China and Europe. Rather than owning resource commodities directly, he prefers to play commodity trends by making investments in company shares. “I don’t invest on the basis of the latest earnings forecasts,” Coxe says, “but choose companies that are building unhedged reserves in the ground and operating in politically stable countries.” > Putin remains a risk Explaining his rationale for recommending U.S. defense stocks, Coxe said Russian president Vladimir Putin will likely continue his aggressive moves in the Ukraine. He points to Putin’s past involvement with the KGB, and his tendency to appoint former KGB officers within his government, as a danger. “Once a KGB officer, always a KGB officer,” Coxe said. Putin is bad news for human liberty, Coxe added. At the same time, he believes it’s only a matter of time before Iran has nuclear capabilities, and there’s growing evidence that China and Russia are getting friendlier. “We’ve entered a new era, and are headed toward the authoritarian age,” Coxe said. “Russia, China and Iran are becoming the drivers of global politics and there is growing risk of war.” Meanwhile, he said, India’s new leader, Modi, has a mandate to modernize India and encourage capitalism. He will be building infrastructure and cutting bureaucracy. “[Modi] will be investing in toilets,” he said, “not statues.”
View comments Marcosian mode: Duterte threatens to arrest water execs ‘one night’ “We were down in the last few minutes but everybody stepped up. It’s really the trust and confidence of the players and our system that propelled us to win this game.”Fernandez reserved the biggest praise for Bolick, who minced no words in expressing his desire to beat La Salle every time, after he led the Lions to victory over the Archers in the elimination round.“He really wanted to prove himself in the first half,” said Fernandez, referring to his point guard who also had eight rebounds and six assists.“And I told him you cannot win alone. I told Robert, if you want to beat La Salle, you have to play within the team.”Jayvee Mocon added 13 points and Clint Doliguez came away with eight points for San Beda, which finished with an 11-0 card.ADVERTISEMENT 7 NPA members surrender in Isabela province Alcantara, Otico rule overseas Gerald: Just because I’ve been bashed doesn’t mean I’d stop working SEA Games 2019: Philippines clinches historic gold in women’s basketball PLAY LIST 05:02SEA Games 2019: Philippines clinches historic gold in women’s basketball06:27SEA Games 2019: No surprises as Gilas Pilipinas cruises to basketball gold02:43Philippines make clean sweep in Men’s and Women’s 3×3 Basketball01:40Filipinos turn Taal Volcano ash, plastic trash into bricks01:32Taal Volcano watch: Island fissures steaming, lake water receding02:14Carpio hits red carpet treatment for China Coast Guard02:56NCRPO pledges to donate P3.5 million to victims of Taal eruption00:56Heavy rain brings some relief in Australia02:37Calm moments allow Taal folks some respite LATEST STORIES End of his agony? SC rules in favor of Espinosa, orders promoter heirs to pay boxing legend Bolick reminded the Archers again of what they’ve lost as he nailed a triple with 8.5 seconds remaining to lift the Lions to a 75-72 triumph that completed a sweet sweep on Sunday night of the Filoil Flying V Premier Cup.The victory before a big Sunday crowd gave the Red Lions their second title in the preseason tournament at Filoil Flying V Arena in San Juan.FEATURED STORIESSPORTSEnd of his agony? SC rules in favor of Espinosa, orders promoter heirs to pay boxing legendSPORTSMcGregor blasts Cerrone in 40 seconds in UFC returnSPORTSBreak new groundThe superb performance against the reigning champions of the UAAP augurs well for the upcoming season for the Lions who open their NCAA title defense against the San Sebastian Stags on July 8 at Mall of Asia Arena.“We won the Filoil, and hopefully we can win the NCAA,” said San Beda coach Boyet Fernandez, whose squad rallied from six points down in the final minute to complete a stunning comeback. A dream fulfilled for Christian Sports Related Videospowered by AdSparcRead Next It’s no secret how much joy San Beda guard Robert Bolick gets from playing against—and beating—his former team De La Salle.Although he has gone on to win an NCAA title with the Red Lions, the memory of his two seasons riding the Green Archers before they allowed him to walk away from Taft lingers for the do-it-all guard.ADVERTISEMENT Swing Out Sister back to PH this April Missile-capable frigate BRP Jose Rizal inches closer to entering PH Navy’s fleet MOST READ For Ina, portraying a zombie is like an ‘out-of-body experience’ Ai-Ai delas Alas on Jiro Manio: ‘Sana pinahalagahan niya ang naitulong ko’ Don’t miss out on the latest news and information.