Investing is a long-term game, but it pays to take advantage of short-term opportunities. Buying assets when they are out of favour and trading at low prices can really pay off, assuming they bounce back later.
So can spotting an opportunity before other investors do and jumping in before it takes off. Inevitably, both are risky. It is never easy to get your timing right.
We asked analysts to name three exciting ways to invest $10,000 over the next three months. The first was supposed to have crashed this year but is proving resilient, the second plummeted last year, costing investors trillions of dollars, but now looks a brighter prospect, while the final one could go either way.
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The US S&P 500
At the start of the year, investors were bearish on the US. They reckoned the index had done too well for too long. It is packed full of big-name technology stocks such as Apple, Amazon, Facebook, Tesla and Microsoft but that strength was suddenly looking like a weakness.
Technology valuations had become overstretched and resurgent inflation looked set to eat into the value of their future revenues.
The S&P 500 crashed by about 500 points at the start of this year to 4,326 on January 27, a drop of 10 per cent that sent it into correction territory.
It fell a further 150 points as Russia's invasion of Ukraine spooked investors then, suddenly, the story changed, says David Jones, chief market strategist at Capital.com.
The Nasdaq 100 is now 8 per cent higher than the day Russia invaded Ukraine and Tesla is a remarkable 65 per cent higher
Paul Allison, head of equity research at Freetrade
Markets hate uncertainty but after such a poor start to the year, the war now looks to be priced into global indexes.
“If markets have discounted the current geopolitical situation, we may see a further recovery over the next three months,” Mr Jones says.
This is a common stock market reaction when war strikes. After the initial short-term response, things settle down as investors focus on the long term again.
The S&P 500 has rebounded to about 4,500. Mr Jones says investors should prepare for further volatility and believes there is investor support for the S&P 500 at these levels.
“It tried to break lower in late February and March but buyers stepped in.”
Research from Freetrade suggests that US technology stocks remain in favour among private investors despite higher volatility, with Tesla the most bought stock among its customers in March, followed by Apple, Facebook-revamp Meta and Amazon.
Big Tech remains the go-to sector for retail investors and this has paid off, says Freetrade’s head of equity research Paul Allison.
“The Nasdaq 100 is now 8 per cent higher than the day Russia invaded Ukraine and Tesla is a remarkable 65 per cent higher,” he says.
Sticking with US technology companies makes sense for a couple of reasons.
“Firstly, their sales and profits are unlikely to be directly affected by the Ukraine conflict. Second, most have solid balance sheets with little to no debt, making them defensive as inflation rises.
“These companies outperformed during the recent correction and are leading the recovery,” Mr Allison says.
Optimistic investors should consider buying a low-cost exchange-traded fund (ETF) that tracks the S&P 500, such as the SPDR S&P 500 ETF, Mr Jones suggests.
“This could be an interesting investment to take advantage of any further recovery in stock markets,” he says.
The S&P still looks expensive, trading around 36 times earnings, but war in Europe makes the US appear as a safe haven right now.
“Just don’t expect a calm, smooth ride,” Mr Jones says.
The iShares Core S&P 500 ETF and Vanguard S&P 500 ETF are alternative options for tracking the index.
Chinese tech looks like a bargain right now, but will remain volatile
Vijay Valecha, chief investment officer at Century Financial
Chinese tech stocks
Chinese technology stocks such as Tencent and Alibaba were popular among western investors but took a beating last year after President Xi Jinping clamped down on the country’s technology billionaires.
Global losses ran into the trillions of dollars, with Tencent’s market capitalisation falling by a staggering $500 billion.
The “tech-lash” eased in March after Vice Premier Liu He called on regulators to adopt a “standardised, transparent and predictable” approach towards overseeing the nation’s big internet services companies.
Now could be a good time to jump back into China technology, says Vijay Valecha, chief investment officer at Century Financial in Dubai.
“Beijing is actively attempting to change course by pledging policies to boost financial markets and stimulate economic growth in a co-ordinated move to boost China tech stocks following the sell-off.”
China has indicated it could hand US regulators full access to auditing reports for about 200 companies listed on the New York Stock Exchange, Mr Valecha says, which would allow Chinese businesses to remain listed in the US.
Mr Valecha cites another reason to be bullish on Chinese technology stocks. While the US Federal Reserve is tightening monetary policy by tapering bond purchases and increasing interest rates, China is cutting lending rates.
“The tech sector is bound to benefit from the cheaper borrowing costs,” he says.
Finally, Chinese stocks look affordable, trading about 11 times earnings, making now a good time to buy them.
“Chinese tech looks like a bargain right now, but will remain volatile,” Mr Valecha says.
To take advantage, Mr Valecha suggests the Krane Shares CSI China Internet ETF, which tracks the CSI Overseas China Internet Index.
“This index is a play on consumption since it gives investors exposure to the country's growing middle class,” he says.
Its top holdings include top Chinese tech names including Alibaba, Tencent, JD.com, Baidu, Meituan and Kuaishou.
“It is an attractive option for investors seeking a turnaround play right now,” Mr Valecha says.
The HSBC Hang Seng Tech UCITS ETF, iShares MSCI China Tech UCITS ETF and Invesco MSCI China Technology All Shares Stock ETF are also worth considering.
Agriculture
The agriculture sector is our final opportunity.
War in Ukraine is threatening global food security, which is already under pressure from climate change and the lingering effects of the coronavirus pandemic, says Josef Licsauer, fund analyst at financial services company Hargreaves Lansdown.
“Its products are in everything we own — from the food we eat to the fabric in our clothes,” he says.
Ukraine and Russia are agricultural powerhouses, he says, responsible for more than a quarter of global wheat exports, 80 per cent of sunflower seed exports and 40 per cent of barley.
Wheat prices have hit nine-year highs and other commodities such as maize, corn, soybeans and palm oil have all surged in value.
“Adverse weather in South America and labour shortages in parts of Asia are also limiting supplies,” he says.
Mr Licsauer highlights two actively managed funds, Sarasin Food and Agriculture Opportunities and Pictet Nutrition.
“They invest mainly in the US, Europe and the UK, but also emerging markets, which increases risk,” he says.
Agriculture prices have soared but the risk is that the supply crunch is already priced in, Laith Khalaf, head of investment analysis at AJ Bell, says.
One way to invest is via an exchange-traded commodity (ETC), which use futures contracts to invest in commodities such as metals, energy, livestock and food.
“It is difficult to store a bushel of wheat in a trading account, so ETCs use futures contracts to gain exposure, but that does make these funds more complex and more costly,” Mr Bell says.
He tips the broad-based L&G All Commodities ETC, which is about 40 per cent agriculture and livestock, with the remainder in energy and metals.
Other top agriculture ETFs include the broad Invesco DB Agriculture Fund, which is up 12 per cent this year, and the specialist Teucrium Wheat Fund, up 40 per cent.
However, it is a volatile sector right now and if the Ukraine war eases, prices could fall.
Updated: April 12, 2022, 5:00 AM
