Your 2018 Halftime Market Blueprint
The first half of 2018 is in the record books.
Boy, was the first half of the year a doozy of a roller coaster ride for stocks. Not only has volatility returned, but we also saw a sharp dollar rally, higher interest rates and the return of inflation.
What’s in store for the last six months of the year in financial markets?
Plenty more twists and turns, I can assure you.
After all, it’s a midterm election year that promises a more-than-healthy dose of political drama.
And then there’s the ongoing trade war drama to look forward to.
But at this time of year I like to look back at what’s worked and hasn’t worked so far this year.
Plus, I look forward to new investment opportunities on my radar going forward.
Let’s start with commodities, and in my next Wealth Watch article I’ll tackle the stock market.
I had high hopes for commodities at the start of the year, but really only one commodity stood out in performance during the first half: energy!
Crude oil was the best-performing commodity by far over the last six months, gaining 23%. Gasoline futures also jumped over 8% in the first half, and natural gas slipped by a few percentage points.
Source: Bloomberg, U.S. Global Investors
Energy sector stocks, unsurprisingly, were second only to tech as the best-performing S&P 500 sector in the first half.
In fact, from the February low to the end of June, the S&P Oil & Gas Exploration & Production Index surged 39%!
Fortunately, I turned bullish on oil and energy stocks early this year, with repeated recommendations for readers.
Oil and energy stocks have come a long way and are likely in need of a pause to help refresh the sector for more gains.
Now I’m waiting for a deeper pullback to go long energy sector stocks again.
Two other major commodity markets posted decent gains too.
Nickel and wheat are both up over 16% during the first half, but that’s about it.
In fact, almost every other major commodity declined during the first half of the year.
That includes gold, which I was bullish on too soon, as the yellow metal slipped nearly 5% in value as the dollar surged higher.
The biggest losers among commodities were a mix of precious and industrial metals that lost their luster.
Zinc was the biggest loser, followed by palladium, platinum and copper — all down about 10% or more.
There’s an interesting theme to explore here, which I expect will lead to a good buying opportunity in the second half of the year.
Palladium and platinum share the traits of both precious and industrial metals. So they suffered a one-two punch with escalating tariffs and a trade war and weak precious metals prices due to a strong dollar.
Copper is a more interesting story.
It is one of the most industrial of metals, but copper has newfound demand from what may seem an unlikely source: electric vehicles (EVs).
According to Bloomberg, EV sales are set to explode from 1.1 million vehicles worldwide last year to an estimated 11 million in 2025.
That’s only seven years from now. The EV manufacturing process gobbles up three–four times more copper than conventional cars due to all the wiring that’s required.
Slowing demand from China, plus U.S.-China trade tensions, hammered copper prices recently, but I expect the red metal will rebound during the second half of this year.
A great way to play it in a single trade is with the iPath Dow Jones-UBS Copper ETN (JJCTF).
For a more leveraged bet in copper producers consider the Global X Copper Miners ETF (COPX).
If the commodities trends I’ve identified prove right, copper plays could be right back in the money for the second half of 2018.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch
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