"Generational Prosperity Period" – Strategist recommends this neglected sector

• Portfolio manager anticipates true generational prosperity period
• Investors should focus on undervalued assets
• Oil and gold investments recommended, among others

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“It’s very difficult today to be structurally bullish on the economy, especially given what we’ve seen in credit markets behaving as invertedly as they are despite the fact that long and short yields are rising,” Tavi Costa explained according to “MarketWatch” in an interview with the financial platform Real Vision. This creates a stagflationary environment, according to the portfolio manager at Crescat Capital.

Commodity sector view

Costa said all of this is happening against a backdrop of “chronic underinvestment in natural resources” and inflation that will continue to drive prices up for almost anything, advising investors to allocate their capital to these assets, which have long outperformed equities and fixed income securities were undervalued. “This is a significant opportunity when trying to profit from what I believe will be a true generational prosperity for many investors,” Costa said, optimistic about the rather neglected commodities sector and also listed several ways that investors are now proceeding could.

Brazil investment

The first route is via Brazil, since the South American country’s stocks have “drastically” lagged behind those of the United States since the global financial crisis. “Think of Brazil itself. It’s linked to just about every type of resource you can think of – from agricultural commodities to mining and metals to energy… so it’s certainly one of the most resource-dependent economies you can find today “Costa explained.

He himself has a small position in the iShares MSCI Brazil ETF (EWZ), but sees more options when selecting individual stocks. He pointed out that banks have always been profitable and are now very cheap. His largest single position in Brazil is steelmaker Gerdau, but he also recommends investors look at smaller Brazilian companies.

Energy sector with upside potential

As a second option, Tavi Costa points to the energy sector. The strategist sees “enormous” upside potential for oil prices, which he believes cannot be kept low by the US. The companies involved are “extremely profitable” and many would also offer high dividends. Investors should not forget medium-sized companies either. Those who prefer to invest in ETFs can consider the SPDR S&P Oil and Gas Exploration & Production ETF (XOP) or the Vanguard Energy ETF (VDE).

Opportunities with gold

Finally, Costa advises a bullish investment in gold. “I think gold will reemerge not only as a central bank asset, which has been the case lately, but also as a hedge against inflation,” argues the strategist.

In his opinion, the price of gold would be driven by purchases by central banks, while production of the precious metal is declining at the same time. In addition, Costa expects political restrictions in view of the increasing indebtedness of countries and companies, in combination with high inflation. The expert was convinced that this would boost tangible assets such as gold. He cited the SPDR Gold Shares ETF (GLD) as one of the many entry points into gold.

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