Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Dow Trend Forecast Current State - 22nd Apr 21
Gold Rebounds Amid Positive Economic Reports - 22nd Apr 21
China's record first quarter fuels strong expansion in 2021 - 22nd Apr 21
Gold Price Next Key Level - 22nd Apr 21
Here's What to Look For When Hiring a Real Estate Agent - 22nd Apr 21
Ethereum EIP 1559 and Raven Coin - 21st Apr 21
Gold, USDX: The Board is Set, the Pieces are Moving - 21st Apr 21
World Economies Need to Find a Lot More COPPER! - 21st Apr 21
DogeCoin CRASH! Time to Start Mining BOODGIE Coin! Crypto Mania 2021 - 21st Apr 21
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The 3 Assets to Add to Your Stocks Portfolio in This Rate Tightening Cycle

Companies / Investing 2017 Aug 23, 2017 - 05:23 AM GMT

By: John_Mauldin

Companies

BY STEPHEN MCBRIDE : I’m surprised how things can turn upside down in a year, even twice.

Exactly a year ago, in the wake of Brexit, the US 10-Year Treasury rate fell to an all-time low of 1.36%. At that point, bond yields—which move inversely to their price—had been declining for eight years with no end in sight.

Then Trump won the US election; another unexpected twist. An uptick in inflation and a series of rate hikes followed shortly afterward, and the 10-year yield has risen 67% from its lows.


While it’s not the best time to increase your allocation to bonds, there are a few asset classes that are likely to thrive in this tightening cycle.

#1 Healthcare Stocks

Healthcare was the worst-performing S&P 500 sector in 2016 and ended the year in the red. However, since the beginning of 2017, the sector is up 16.2%.

And the future looks bright.

In their latest Earnings Insight report, FactSet found that of all the sectors, healthcare received the most bullish ratings from analysts for Q3 2017.

Another healthcare “bull” is Steve Cohen, a billionaire hedge fund manager who has achieved annual average returns of 30% for two decades. His firm’s latest quarterly SEC filing shows healthcare stocks made up 19% of the portfolio.

So, why are investors bullish on healthcare stocks after years of underperformance?

One reason is the rising interest rate environment.

According to BCA Research, since 1970, the sector has always outperformed the market during hiking cycles.

Fidelity Investments also found that healthcare has consistently outperformed in late-stage expansions. Given that we are in the ninth year of this expansion, it certainly can be considered “late stage.”

Besides top-down factors, the sector also has superior earnings-per-share growth—a driver of long-term equity returns.

#2 Europe

Just a year ago, Europe looked like the last place you’d want to put your money in. The UK had voted to leave the EU, top German and Italian banks were wobbling, and populist sentiment reigned on the Continent.

Most of those risks have subsided—at least for now. While everyone was applauding the uptick in US growth after the election, Europe recorded higher growth in 2016.

Ditto with stock indices.

After the election, most investors have flocked to US equities. And it was the right move. From the election until December 31, the S&P 500 gained 8.2%. However, since the beginning of 2017, the Vanguard FTSE Europe ETF (VGK)—the main ETF for the European market—is up twice as much as the SPDR S&P 500 ETF (SPY).

And now Europe’s performance has drawn the interest of major money managers—which is a bullish signal in and of itself.

In March, JPMorgan stated it was overweight Europe due to solid economic momentum and fading political risk. In a recent outlook, Credit Suisse said Europe was its “most preferred region,” citing attractive valuations as the reason.

Despite improving fundamentals and strong performance, EU stocks remain relatively undervalued. For example, the Shiller P/E ratio is 55% lower for EU stocks than for their US counterparts.

Given the positive outlook and rising prices in Europe—and with the S&P 500 flat since March—investors are likely to start pouring money into Europe.

#3 Peer-to-Peer Lending

Another asset class that has enjoyed a recent resurgence is peer-to-peer (P2P) lending.

The P2P sector has grown rapidly in recent years and is a great source of fixed income for investors. P2P investors are currently averaging 7.3% returns on 36-month loans. Even those who took the most conservative approach saw returns of 5%.

What started as peer-to-peer has grown into a marketplace for some of the world’s largest financial institutions. The likes of Goldman Sachs and Morgan Stanley now account for over 70% of new capital. Goldman recently launched its own lending platform named Marcus, making it the first major bank to do so.

Aside from the outsized returns investors can earn, P2P also offers diversification benefits.

The grid below shows the correlation of different assets to the US stock market. An investment with a correlation of 1 would exactly track the volatility of the US stock market. As you can see below, P2P lending’s correlation to the US stock market is just 0.19.

Of course, P2P lending comes with its own set of cautions. As P2P investing really only started to gain momentum in 2009, the platforms are largely untested in a serious and sustained economic downturn.

Given this and the fact that P2P loans are unsecured, you must be fully aware of how to enter this market and steer your way through it.

Free Report: The New Asset Class Helping Investors Earn 7% Yields in a 2.5% World

While the Fed may be raising interest rates, the reality is we still live in a low-yield world. This report will show you how to start earning market-beating yields in as little as 30 days... and simultaneously reduce your portfolio’s risk exposure.

Claim your free copy here.

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules