In general, avoid traditional assets like major stock, bond and real estate markets - all now overdue for a correction
12 festive tips on how to invest in 2018
So you missed the bitcoin boom in 2017, or just cashed out with a fortune, and would like to have some festive cheer by the end of next year. Christmas Day might be a moment to pause for thought.
As ever the devil is timing when to buy and sell. But first you need to be looking in the right places. I’ve been at various festive parties over the past few weeks asking the experts I respect for their standout investments for 2018.
Usually, more than one have the same idea so I’m not going to be naming their names, and will just focus on the actual investment classes, trawling as widely as I can for ways to outperform next year.
I’ll keep it brief so that I can mention twelve likely investment hot spots to research at your leisure on the internet this festive season.
But in general, avoid traditional assets like major stock, bond and real estate markets - all now overdue for a correction because of rising interest rates. Please sober up if you are tempted by bitcoin, soon to join the long list of speculative investment bubbles inflated by the madness of crowds.
Instead focus down on these areas, albeit you might want to wait for a dip in prices before actually buying:
1. Big oil: Over the past couple of years I’ve been bullish about oil’s recovery when others doubted it could happen. Well it has happened anyway. This cycle has further to swing in the upwards direction. Hence stocks in major oil producers and the oil service sector look worth considering.
2. Dubai stocks: Some of the old Dubai trading house tell me they’ve just had their worst year in 30, although I find that hard to believe as a hotel reviewer who struggles to get a room, or judging from the number of cranes around town. However, economic growth has been low due to the delayed impact of the oil price crash and multiple regional political issues. Things won’t improve overnight on New Year’s Eve but buying solid Dubai shares will lever up on the recovery as it unfolds, and it is always darkest before the dawn.
3. Vietnam: Asia’s rising star at the moment is Vietnam. More politcally stable than Thailand, and with a very ambitious young population, this is where Chinese companies are moving production as their own wages rise. Chinese growth is expected to stall further in 2018 in a credit squeeze, so why not follow the Asian smart money into neighbouring Vietnam?
4. Indian equities: I am no expert on the Indian equity market but as an economist I can spot the country with the highest potential to boost economic growth in 2018. Incredible India could surprise to the upside with recent business-friendly reforms bearing fruit and strong foreign investment flows.
5. Gold: Every investor should have an allocation of gold as an insurance against disasters elsewhere. More positively, gold has decisively shifted out of its 2011-15 bear market and risen with all the recent rate rises from the Federal Reserve. With three more rises in the wash for 2018 the price should continue its recent ascent, and even a bitcoin-style bubble is possible if you believe the bull market that started in 2000 can only be completed with a price spike driven by a fear of inflation and global monetary realignment.
6. Silver: Gold’s moody sister silver tends to get even more excited in an uptrend, mainly due to supply constraints. Speculators love it but have shied away since the boom and bust in 2011, and got distracted by bitcoin. Will they be back to pick up the baton in 2018? Stranger things have been known. The silver price is also presently so cheap that there is arguably little downside risk to staking a claim now.
7. Junior gold and silver stocks: These equities are the prerogative of the market gamblers and not for the fainthearted. However, they offer leverage to the price of gold and silver without having to buy options that expire. The well-known ETFs like GDLJ and SILJ provide exposure to a basket of these stocks to avoid the tricky business of stock picking. Whenever precious metals prices really motor then these are the Ferraris out front.
8. Eastern Europe: Again this is down to economic growth prospects for 2018 which are broadly twice as good as western Europe and four-times that of the UK. Buying an apartment in a capital city is one avenue I’ve explored in this column and done myself, in Budapest. There are also specialist equity funds for eastern Europe worth researching.
9. Dubai property: I’m less impressed by buying off-plan on the city outskirts than by snapping up completed property in the best locations while the market is on the floor. Buying low really works in real estate because you can leverage up so easily with a mortgage. That’s why you meet more people who’ve made their fortune in this asset class than any other.
10. Euro: Could the euro again be the currency of the year? Forex experts seem to think so. Then again, if that’s the consensus is it not already in the price? However, the dollar did get to a 14-year high at the end of last year and probably has a lot further to tumble. Conversely, the Fed has started to raise rates while the euro is just leaving ground zero, so will play catch up.
11. South Korea: The well documented geopolitical problems with North Korea leave South Korea exposed and its equities are valued accordingly. Some great companies many therefore be going cheap, unless the worst happens. But do you buy now or wait for a crisis to be a true vulture investor? My crystal ball becomes a little hazy at this point.
12. Russia: When reviewing the Shangri-La at The Shard in London this summer I was amazed to discover that there are now three higher towers in Moscow. Don’t underestimate the Russian recovery to come as oil and gas prices increase. There’s a currency play here, too, as the rouble remains bombed out. Was it a coincidence that my favourite Arab billionaire friend on Facebook was there the week before last looking at the Christmas lights?
Peter Cooper has been writing about Arabian Gulf finance for 21 years.