Where would you invest USD 1 Million today?

December 2018  

The stock markets remain concerned about:

-the general rise in bond yields/interest rates

-trade tension between US and China and a move to global protectionism

-a belief that we are at the latter stages of a multi-year bull market with a 2020 US recession a distinct possibility.

  • The S&P 500 is 16% down from its record peak it reached in September.
  • NASDAQ (the technology index) is down 20%.

One thing seems certain for 2019 is that it is going to be volatile so something of a balanced portfolio is required.

Given that the US remains by far the fastest growing developed world economy (third quarter annualised GDP growth 3.5%) and the dollar seems well supported by gradually rising interest rates, investors have to opportunity to buy US equities at prices 15-20% cheaper than in September. The time to buy is when ‘there is blood running in the streets’ and to a certain extent this is now.

So I would allocate 60% of my portfolio into USD equities.

30% into stocks/sectors that continue to benefit from Trump’s pro business policies i.e.

  • Banks e.g. Bank of America Merrill Lynch – benefiting from banking deregulation
  • Construction (or similar) companies e.g. Caterpillar Tractor benefiting from the Trump increase in infrastructure spending (but its share price has suffered recently as a bell-weather for the global economy).

30% into technology stocks especially the FAANG stocks – Facebook, Apple, Amazon, Netflix, Google which have seen sharp price falls recently. FAANG stocks remain ‘game changers’.

To balance the risk in the portfolio I would put 30% into bonds split between US and Europe. Bonds will perform well if equity markets remain volatile.

The final 10% I would put into gold which reached a 6-month high this week at 1,260 dollars per ounce. Gold is the ultimate ‘safe haven’ investment.

About Paul McCormick

Paul McCormick is the founder of Opening City Doors and is a Financial Market Specialist having worked for several leading Investment Banks and financial technology institutions additionally.He therefore provides a unique insight, and unusually broad perspective, into the opportunities available in London Financial Markets and related sectors and how to launch your career in the ‘City’.