The Investment Juncture for a Quality Portfolio

By Sabine Saadeh author of Trading Love

Sabine Saadeh author of Trading Love

To say that the first half of 2022 was brutal is nothing short of the chaos and uncertainty that has been constructed globally. With the pandemic highlighting the rule system as obsolete and the legal infrastructure as unrealistic, the only things investors were left with were baleful obstacles. For some reason, global leaders decided to drop efficiency for gains of security, maintain a political stigma that was gloriously named “friendshoring” and weaponizing trade during a supply chain crisis. However, despite all this gloom, there are new trade corridors with emerging economies that are showing higher growth potential than developed economies, which means more opportunities for investors to buy cheaper investments with upside potential in an inflationary environment.

The developed world exported extraordinary leadership to developing economies creating remarkable brands that have become competitive on a global scale, with that in mind there are fantastic bargains for stocks in emerging economies, at the same time, with the massive selloff in capital markets, there are buying opportunities for quality stocks in developed economies. Companies that are keeping net zero in mind will fare better than businesses that have not accounted the importance of ESG as the leading global framework for a more sustainable world.

As an investor in this environment it would be wise to mention that a recession is imminent because central banks were late at curbing inflation despite the clear red flags such as demand driven madness for products and services during lockdown which created a substantial supply chain crisis that was fueled by massive resignations for the sake of more fulfilled lifestyles. The great resignation is behind the low unemployment rate figure that does not make sense anymore, because there a lot of shortages in the labor markets. It is also prudent to keep in mind that the recession that will happen is a forced recession to bring down prices because inflation is not going to cool down any time soon and the underlying reason for that are the hoards of cash that consumers have still not yet spent in the real economy!

The are signs that the global economic activity is beginning to slowdown since a lot of businesses are finding it more expensive to borrow money and therefore their demand is decreasing for labor and commodities, the set up is becoming perfectly ripe for 2022 becoming the year that will put both stocks and bonds in a better starting position for future returns.

My investment recommendations would be the following:

1. Financial stocks have been remarkably cheap for a long period of time now and have a great upside potential especially if they are spearheading financial innovations in green investments, and supporting trade diversification with new trade corridors by decreasing their dependence on one source of supply.
2. Technological stocks have undergone a great selloff yet they are the core of global mega-trends that are reshaping our world, and despite the fact that the pandemic exacerbated the digital divide; it proved to be most essential in carrying out the trivialities of our daily lives. With inclusion and sustainability as the pillars for growth, these stocks offer little resistance for positive gains.
3. Dividend aristocratic stocks are like gold, it is never a bad idea to invest in them!
4. Revolutionary stocks for high risk appetites; for example Psychedelic stocks have an enormous upside potential. They are the pathway between eastern and western medication, their benefits will far exceed their breakthrough in only treating serious mental health disorders.
5. Defaulted debt of emerging economies are also an investment opportunity for investors that enjoy risky securities, because there are emerging economies with great businesses but unfortunately are enduring in environments of high corruption..

Finally, Stablecoins will no doubt have a bigger role in the near future. The blockchain technology is the alternative to raising capital in an ever changing global economy that is showing a lot of fragmentation, however just like with any nascent technological innovation errors are bound to happen especially with a technology that is decentralized!
People are emotional, emotions provoke extreme behaviors, the recent crash in cryptocurrencies is hardly as alarming as their incredible appreciation last year. People invested in cryptocurrency the same way they invested in meme stocks which are part of the centralized financial system, however because decentralized finance is still opaque and not as widely understood it is more likely to receive criticism and get pulverized. Fear played a major role in the recent crypto sell off.

Stablecoins that are backed by commodities and currencies have a great upside, they provide capital to cash strapped economies and businesses. With the current trajectory of how things are moving globally cash strapped countries are increasing.