Friday, January 06, 2023
We just closed the books on the worst year for stocks since the 2008 financial crisis.
In 2022, the Fed drove up interest rates to cool down an economy riddled with forty-year high inflation, and created fears of a recession on the horizon. Against this backdrop, the bellwether S&P 500 closed last year down nearly twenty percent.
A fall like this may tempt some investors to take a breather, and simply wait for the market to turn around. But that would be a big mistake.
Nobody knows when the market will bottom out, meaning nobody knows when things will turn positive. The last place you want to be when the next big rally comes along is sitting on the sidelines.
With that in mind, let me begin Part 2 of my look ahead to 2023…
And reveal three key investment opportunities you don’t want to miss. (For a look at Part 1, where I show you how to create a personalized investment action plan, click here.)
Notably, all three opportunities involve exchange-traded funds, or ETFs. Simply put, ETFs are funds that track a specific index — the S&P 500, for example — and feature a collection of stocks.
They enable investors to take a targeted approach, but not stress if a single stock continues to decline. All you have to do is let the pros do the heavy lifting, while you sit back and enjoy the gains.
The first ETF includes a broad array of new medical compounds on the cutting edge of science, as well as established drugs with solid cash flow.
Formally known as the First Trust NYSE Arca Biotechnology Index (FBT), this fund holds thirty equities in its portfolio. This is an excellent way to invest in emerging fields like genetic engineering and molecular biology.
FBT’s holdings read like a “who’s who” of biotech leaders. They include:
The investment thesis behind this ETF centers around one issue: Ukraine.
It seems Congress and the White House are prepared to continue economic and military aid in Ukraine’s defense against Russia. The war has also increased demand for U.S.-made weapons systems among NATO allies.
I believe this trend will continue long after the war in Europe ends. That’s why investors should consider the PowerShares Aerospace & Defense ETF (PPA).
This cost-effective ETF consists of eighty-percent defense and aerospace stocks from proven leaders. It features a solid mix of cutting-edge small-caps like Aerovironment (AVAV), a leader in drone technology that supplies the Pentagon with unmanned vehicles…
As well as holdings in big names like Raytheon (RTN) and Northrop Grumman (NOC). These well-capitalized defense contractors have flourished for decades, regardless of Washington’s defense-budget battles.
You’ll also find personal defense leader Axon Enterprises (AXON), best known for making stun guns and body cams used by police.
With China easing Covid lockdowns, the economy of the world’s most populous nation is due for a boost. The best way to play this opportunity is to focus on companies that are web-centric, meaning we’ll stay away from those that involve reopening factories or logistics centers.
Instead, we’ll focus on the Emerging Markets Internet & E-Commerce ETF (EMQQ). This fund has some of the biggest players in the developing world’s internet and e-commerce spaces…
We’re talking Chinese giants like Alibaba Group Holding Ltd. (BABA), Baidu Inc. (BIDU), and Tencent Holdings Ltd. (TCEHY).
Alibaba is often referred to as “China’s Amazon,” while Baidu is an online search business that boasts a more than sixty-percent share of China’s search traffic. Forecasters at IResearch say Baidu captures more than ninety percent of China’s online search advertising market.
Tencent gets less attention here in the U.S. but is another broad play on China’s burgeoning internet sector. The company does everything from online payments to gaming and advertising.
More than fifty-one percent of EMQQ’s holdings are Chinese stocks. But there are also companies based in India and South Korea in this fund.
Additionally, EMQQ offers exposure to Latin America and South Africa. For instance, it holds Mercardolibre (MELI), Latin America’s dominant online auction house.
Meanwhile, Naspers, Ltd. (NPNSY) is the fund’s ninth-largest holding, but is hardly known in the U.S. This South Africa-based firm provides e-commerce-related services and platforms to more than 130 countries.
All three ETFs are a great way to play the markets in 2023.
I suggest investing small amounts to start, and adding to your holdings over time, especially if you can buy more on the dips.
That way, you will continue to build your wealth over the long haul with three funds that give you access to some terrific companies.
And if you’re looking for the mother of all ETFs, check out my “Trade of the Day” recommendation below.
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Cheers and Good Investing,
Chief Investment Officer
Trend Trader Daily