Ian Harnett in Bloomberg: How to Invest $10,000 Right Now

Look to Japan

The idea: Over the longer term, we expect international equities to gain ground and the US dollar to weaken. The currency most likely to rally against a weaker US dollar is the Japanese yen, making investing in Japanese real assets an interesting potential investment. Also, in a world of European Union and Chinese reflation, higher tariff-related inflation and a weaker US dollar, we should see commodities such as copper and gold continue to rally.

The strategy: Japanese assets remain attractive due to the lack of leverage and attractive valuations. However, given that the yen is very weak and is the most likely to appreciate, should the dollar weaken we’d focus on buying real estate (think: hotels) or infrastructure assets, many of which have high dividend yields and relatively stable cash flow. We use private funds to do this. While you might think copper would be exposed to the downside if there is a recession, it will remain a key ingredient in the long-run recovery and energy transition. It’s also likely to rally if we see a weakening in the US dollar, and it remains a strong hedge against higher inflation. Gold, meanwhile, remains a safe haven in a risky world. We believe there is a major shift from central banks to buy gold as they look to diversify reserves away from the US dollar. If inflation rises, real yields tend to fall, which historically has supported gold prices.

The big picture: We’ve become more cautious on the outlook for US and global equities and expect market volatility to remain elevated. Tariffs tend to push up inflation and push down activity. Historically, this combination has been unambiguously bad for stock valuations. However, one unexpected benefit from the increased economic assertiveness of the US is that it has forced Europe and China into greater fiscal activism. This has seen international equities race ahead of US equities. But, in the short run, this rally may have gone too far.

How to ETF it

Investors can choose from many ETFs to gain broad exposure to Japanese stocks, though none give exposure to only real assets, said Bloomberg Intelligence’s Andre Yapp. For diversified exposure, there are funds like the Franklin FTSE Japan ETF (FLJP). This ETF has an expense ratio of 0.09% and no currency hedge, which should play well with Harnett’s expectation of yen appreciation. Investors could enjoy a currency bump-up upon liquidation of the stocks and a translation back into the US dollar. But the opposite would be true if the yen depreciates relative to the US dollar, Yapp said. So, for investors seeking to eliminate currency risk, look to the Franklin FTSE Japan Hedged ETF (FLJH), which also costs 0.09%.

Elsewhere, the United States Copper Index Fund (CPER) uses derivatives to gain exposure to the price moves in copper and has an expense ratio of 0.80%. For indirect exposure, investors could look to an ETF like the Global X Copper Miners ETF (COPX). Meanwhile, the SPDR Gold MiniShares Trust (GLDM) offers direct exposure to the price of gold bullion for a cost of 10 basis points.

Last period’s ETF performance

The Tema American Reshoring ETF (RSHO) and First Trust RBA American Industrial Renaissance ETF (AIRR) were both down about 15% since the last Where to Invest $10,000 story published on Jan. 30. The Global X Data Center & Digital Infrastructure ETF (DTCR) and Pacer Data & Infrastructure Real Estate ETF (SRVR) dropped about 5.5% and 1.8%, respectively. The Range Nuclear Renaissance Index ETF (NUKZ) fell 19%, while the aerospace-heavy Global X Defense Tech ETF (SHLD) bucked the downward trend and rose some 25%.

Alternate idea

If you’ve never been to Australia, an investment of $10,000 would be money well spent. The iconic Sydney Opera House and Harbour bridge are not all that the city has to offer. There are the beautiful botanical gardens, a wonderful Maritime Museum, a world-class aquarium, the excellent New South Wales Art Gallery and much more. Melbourne offers a vibrant nightlife and dining scene that will leave foodies wanting to stay an extra week. Both cities have excellent local railway systems so you can easily get to places away from the cities. Given my interest in aviation, a recent trip to Melbourne also included a visit to the Royal Australian Air Force Museum just outside Melbourne.

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