According to an article in FE Trustnet, Justin Oliver, investment director at Canaccord Genuity, has chopped down his exposure to Europe, technology and healthcare and used those profits to up exposure to energy funds, an aerospace and defence ETF and the US dollar to hedge against the possibility of further instability in the Middle East and Ukraine.
Specifically, Oliver has been buying funds that give him exposure to the oil price, saying:
“The reason behind that is that we don’t know what will drive a pull-back in the market. However, if tensions continue to increase then a spike in the oil price could be one of them… The sector still has valuation support and there is a lot of dollar earnings, which also helps.”
If the US is forced to intervene further in Iraq against the Islamic State, Oliver believes the aerospace and defense sector would likely receive a boost, plus:
“There could also be a more of a long-term theme here because as China continues to grow, so will their military capability so we could see the US giving more focus to the Asia. However, in the short term if there is more instability then we would expect the sector to do well.”
Oliver is also hedging with the US dollar (rather than gold), which he expects to strengthen as the market becomes increasingly focused on rising interest rates in the US when QE eventually finishes this year. Regarding gold, he commented:
“It’s something we talked about quite extensively. We don’t really have the conviction that gold will act like the safe-haven asset it has been in the past because its safe-haven characteristics have broken down recently. I think the dollar will strengthen, which hasn’t been a good sign for gold in the past.”
To read the whole article, Funds to hedge against the turmoil in Iraq and Ukraine, go to the website of FE Trustnet.
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