Where to look for “China 2.0” … how to benefit from one of the worst trends in the world … the sector poised for growth thanks to institutional dollars … short-term trading gains with Luke Lango
Today, let’s put three no-brainer buy-and-hold recommendations on your radar.
These macro plays won’t make you rich overnight, but if you’re patient, each will grow into rock-solid pillars of your portfolio in the years to come.
There’s lots to cover so let’s jump straight in.
The big news yesterday was about China’s declining population
For the first time in six decades, China’s population fell in 2022.
This is an historic turning point with dangerous implications for the world’s second largest economy.
The country’s National Bureau of Statistics reported a drop of roughly 850,000 people for a population of 1.41175 billion in 2022, marking the first decline since 1961, the last year of China’s Great Famine…
Long-term, U.N. experts see China’s population shrinking by 109 million by 2050, more than triple the decline of their previous forecast in 2019.
When an older, less productive population vastly outnumbers its younger, productive population, it’s a recipe for economic stagnation, and possibly social unrest.
From The New York Times:
By 2035, 400 million people in China are expected to be over 60, accounting for nearly a third of its population…
Labor shortages that will accompany China’s rapidly aging population will also reduce tax revenue and contributions to a pension system that is already under enormous pressure.
Whether or not the government can provide widespread access to elder care, medical services and a stable stream of income later in life will affect a long-held assumption that the Communist Party can provide a better life for its people.
So, where’s the investment here?
Consider having had the chance to invest in China years ago when it was still on its economic and demographic upslope.
Well, you have a very close parallel to that opportunity available today…
India is on a steep economic upswing with years of high-paced growth ahead of it.
This is, in part, fueled by its population explosion. In fact, India might have just passed China for most populous country in the world. And expectations are for population gains until roughly 2050.
(China’s population decline) possibly makes India the world’s most populous nation.
U.N. experts predicted last year India would have a population of 1.412 billion in 2022 though they did not expect the South Asian nation to overtake China until this year…
[In India], Google Trends shows a 15% year-on-year increase in searches for baby bottles in 2022, while searches for cribs rose almost five-fold.
Meanwhile, Morgan Stanley reports that India is on pace to become the world’s third largest economy by 2027, surpassing Japan and Germany. And by 2030, it will have the world’s third largest stock market.
From Morgan Stanley:
All told, India’s GDP could more than double from $3.5 trillion today to surpass $7.5 trillion by 2031.
Its share of global exports could also double over that period, while the Bombay Stock Exchange could deliver 11% annual growth, reaching a market capitalization of $10 trillion in the coming decade.
Betting on India’s growth through a diversified ETF is a no-brainer investment that will make you solid returns when held for the long-term. While you swing for the fences with other picks, India can be the slow-and-steady workhorse of your portfolio.
The simplest, one-click way to own India is through the iShares MSCI India ETF, INDA. It gives you exposure to a basket of the largest companies in India, with a reasonable (though not cheap) expense ratio of 0.68%.
Back to Morgan Stanley for the bottom line:
In a world that is currently starved of growth, the opportunity set in India must be on global investors’ radar.
India will be one of only three economies in the world that can generate more than $400 billion annual economic output growth from 2023 onward, and this will rise to more than $500 billion after 2028.
For our second idea, let’s benefit from one of the fastest-growing threats in the world
It’s everywhere, and it’s getting worse.
Personally, I’m on some cybercriminal’s mailing list. I receive an email almost every day informing me that my Coinbase account has initiated a transfer of $X thousand dollars. The “security” email wants me to click on a link to verify, which would surely inflict God-knows what damage to my computer.
The silver lining of these types of attacks is that there’s a robust and growing market for cybersecurity.
For more on this, let’s turn to our macro expert, Eric Fry of Investment Report:
Cyberattacks have become so frequent that they now average 2,200 per day – one every 39 seconds. That means there’s probably been another cyberattack just since you started reading this…
And while there won’t one day be a world without cyberwarfare, there is a huge section of the market bursting with potential that is fully dedicated to shielding your information from these hacking fiends…
The investment that Eric highlighted months ago is the ETFMG Prime Cyber Security ETF, HACK
It holds cybersecurity heavyweights including Cloudflare, Palo Alto Networks, CrowdStrike, VeriSign, and Cisco.
Back to Eric:
HACK has slumped 28.27% from Jan. 2022 to the present, though it has shown some signs of life over the past two months…
Despite this pullback, Eric urges readers to focus on the longer-term, pointing toward HACK’s much higher market price before inflation, bond yields, and interest rates dragged on the market last year.
Here’s Eric about HACK’s future:
The underlying trend hasn’t changed.
The odds that cyber threats will decrease in the coming years are, to quote Muhammed Ali, “Slim, and none. And Slim just left town.”
HACK and cybersecurity stocks are likely to return to previous highs and then some.
Finally, for our third macro recommendation, let’s turn to legendary investor Louis Navellier
Regular Digest readers know that Louis recently made a “Big Bet” on the market. He went overweight into top-tier energy stocks.
Here he is to explain:
Typically, I don’t take a big bet in any one sector. But energy-related stocks were the only ones popping up on my screens.
As you may know, energy was the best-performing sector in 2022, up more than 58%.
The energy sector still has the strongest forecasted earnings, and as a result, their weights in the major indices has continued to climb.
As we’ve noted in past Digests, this idea of “index weightings” acts as a natural tailwind to the prices of specific energy stocks that are joining new indexes.
Back to Louis for how this works:
As indices’ weights change, many institutional investors are also forced to change their holdings. There’s something called a tracking manager who tries to “hug” the benchmarks, not beat them – and these tracking managers dominate Wall Street trading…
…When there’s positive results or developments, the weight is increased. We saw this happen in the energy patch, and in turn, tracking managers also boosted their weights.
Overall, I anticipate institutional buying pressure to remain persistent in the energy sector for at least two more years, if not longer.
By the way, yesterday, a report from the International Energy Agency forecasts that global oil demand will hit a record 101.7 barrels per day this year. Nearly half of that will come from China reopening after its Covid-lockdowns.
And just this morning, the head of the world’s largest oil company, Aramco, said he believes we’re going to have a supply shortage.
Lots of tailwinds for this corner of the market.
A simple, one-click way to own top energy and natural gas stocks is through the Invesco Dynamic Energy Exploration & Production ETF, PXE.
In holds top names including Marathon, Valero, Pioneer Natural Resources, ConocoPhillips, EOG Resources, and Occidental. Its expense ratio comes in at 0.63%.
Let’s end today by switching from “long-term gains” to “collect cash now”
Tomorrow at 4 PM ET, our hypergrowth expert Luke Lango is holding a special live event to detail a trading strategy that’s designed to put big returns in your pocket in a matter of weeks, not years.
The market approach is the same one Luke uses in his trading service, Breakout Trader.
I’m looking at the Breakout Trader portfolio as I write Wednesday morning, seeing open gains of 27% on a trade beginning on October 25th… 39% on a trade originating on October 4th… there’s even one position up 76% that Luke recommended just seven weeks ago, on November 29th.
We’ll bring you more details on this in tomorrow’s Digest. But if you’re looking to complement the slow-and-steady investments we profiled today with shorter-term, potentially explosive trades, make sure to join Luke tomorrow at 4 PM ET.
Have a good evening,