Central banks can't do QE forever, hold 25% commodities as inflation hedge for the next decade - USCF
Editor's Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what assets will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It's a showdown of global proportions, so don't miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.
(Kitco News) - The U.S. has officially closed the book on a momentous decade as the S&P continues its longest bull run in history; the market has rallied consistently for the last 10 years. The Index is up 184% since 2010.
The gold market is also attracting new attention on the cusp of the new epoch. Although prices are still down from its record highs hit eight years ago, the precious metal ended the decade with a gain of 34%.
The questions investors are now asking is: what is in store for markets as the world embarks on a new decade. What are the risks and opportunities to watch for in the next 10 years?
For Kitco News’ Showdown 2020 outlook, we are have asked a panel of experts their thoughts on the next decade and how they would invest $100,000 for the next decade.
Expert: John Love
Claim to Fame: President and CEO of USCF
How would you invest $100,000 in the next decade?
I'd seek broad diversification across asset classes, using ETFs. Too many people think diversification means stocks and bonds, or large cap, small cap, etc. I'd set aside 65% for these traditional assets. In equities, I'd seek to own the broad developed market in low-cost ETFs.
Same with bonds. I would add in emerging market stocks and bonds next. I'd include frontier markets, too. With the next 25%, I'd allocate to alternative asset – commodities, real estate, private equity exposure, etc. Finally, I'd save 10% for the inevitable itch to speculate on particular investments.
Never touch the 90% except to tweak your allocations. There's no way to know what will be the best performing asset over a decade. You'll look back and tell yourself, I should have invested in "that." But you can't know what "that" is today. No one can. So diversify your risk and sleep well at night.
What are the biggest trends you are watching heading into the new decade?
Global debt and the reemergence of inflation. We've been able to kick the can down the road with low interest rates and QE for a long time now. I don't know how long that can continue.
We may get some additional reprieve from demographic trends, but the chickens have to come home to roost sometime. You cannot spend forever. Sooner later you pay the price. Inflation will be that price for letting our leaders, of all stripes, spend so irresponsibly.
What are the biggest threats you see in the next 10 years?
On the opposite side of inflation, I am worried how changing demographics will affect markets. I'm also extremely concerned about attitudes towards capitalism and the embrace of socialism.
Capitalism will always require vigilance to maintain fair rules, and we should maintain and improve social safety nets to protect the vulnerable and disenfranchised. But capitalism, properly chaperoned, is far better than any other system. It's counterintuitive -- harnessing individual self-interest produces the greatest common good.
How would you describe the outlook for the next 10 years?
In 2009, everyone said the next decade would see flat stock market returns, Japan-like stagflation, maybe worse. Then we had the greatest bull run in history. In 2019, we're saying a lot of the same things. It's not without basis. Nevertheless, predictions for coming decades are usually abysmal. No one knows. That's why you should diversify and not chase headlines.
How long do you think the bull run in equities will last?
The Fed is supportive and there's no euphoric bubble, so it doesn't feel imminent. It would be prudent to expect more volatility in 2020 and I wouldn't be surprised by some downside closer to the election.
Any final comments about what the next decade hold's for investors?
Lots will change in ways no one can predict. Diversification is the way to deal with the unknown.