Everything is cyclical. There’s even a cycle of investor emotions we all have in common as the market goes up and down ranging between optimism, anxiety, depression, hope and relief. As you can see from the chart below, the most exciting times often present the biggest risks, while the most challenging times present the biggest opportunities.
In every stage of the market cycle, it’s important to stay level-headed, diversify and remember that you are in it for the long game. But what are some areas that may have been forgotten but deserve attention in this part of the cycle?
First, for cash that you can invest for up to a year, a laddered 3-12 month treasury portfolio would be an option. Bonds have been all but forgotten, but more recently yields have been rising giving investors some yield. Keep in mind that if you keep a bond until maturity, you get your principal back along with interest payments.
Second, basic materials and products look very promising at this point. The war in Russia and Ukraine puts supply constraints on many of those because Russia is a source that is not available for much of the world.
Third, emerging markets / developing markets will benefit when the dollar reverses course. The dollar is really high right now and emerging/developing markets are low. This may not materialize tomorrow but at some point this sector presents an opportunity.