2012 has been a tough year for investors and businesses alike. Elections, the fiscal cliff, the long-looming European debt crisis, and quantitative easing have shaped both news and markets. Businesses are holding off on IPOs or paying dividends early and investor’s uncertainties have become palpable.
Most investors hope 2013 brings a bullish market and more economic certainty but they’re not banking on it. In the accompanying interview, Josh Brown of The Reformed Broker blog and Fusion Analytics shares how to make the most with what we have.
His top three investment themes for 2013 include:
1. Weird Science
Apple (AAPL), Google (GOOG), Intel (INTL), and Microsoft (MSFT) were once heralded as tech underdogs looking to shake up a stagnant industry but these firms are now 10-30 years old and running the show. Hot money will go to a new, younger group of tech companies in 2013, says Brown. Look into growth industries like 3D printing, electric cars, automation, and robotics. Brown predicts that mid-cap companies like iRobot (IRBT), 3D systems Corp. (DDD), and Stratasys Inc. (SSYS) will soon rise to the big leagues.
2. Bond Binge and Purge
Earnings in the first quarters of 2013 will be weak because of the fiscal cliff’s increased taxes/lower spending double whammy. Investors will flock to fixed income in the early months of the year. Despite all this, big fund flows and the Federal Reserve increasing liquidity will overpower fiscal cliff woes and make equities the ruling asset class in time for the last quarters of the year.
3. Emerging Markets Debt
The Economist, Barron’s, MarketWatch, and now Josh Brown predict emerging markets will be a top asset class in 2013. Brown recommends investing in the debt of these countries. Emerging markets are growing rapidly and need to take on debt to do so; they also have an average debt-to-GDP ratio of only 35% versus 100% for developed nations, Brown explains. Emerging countries hold 66% of all foreign currency, have a growing middle class, and offer high-yield returns, Brown adds. Look to watched funds like WisdomTree’s Emerging Local Debt ETF (ELD) to get involved.
Last year Josh Brown correctly predicted 3 out of 3 investment themes for 2012. His predictions included the return of emerging markets, actively managed ETFs and the return to high-yield stocks. Watch out Nate Silver, Josh Brown is on fire.
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