12 Trade Ideas For The First Half of '24
Need ways to express gold moving higher? Aggressive rate cuts? An EU recession? We've got you covered.
We held off publishing our usual trade ideas on Monday, given the closure of markets and low volume that this period between Christmas and New Year brings with it.
Instead, we wanted to run over some of our medium-term ideas, which we bucket with a 0-6 month time horizon. As usual, we compile the ideas from across our three-man team, bringing in cross-asset ideas from across the investing universe. As a note, these are our musings based on a variety of different scenarios that could happen over the course of H1.
Ideas for faster-than-expected rate cuts in the G10 complex…
Buy REIT’s
Real estate investment trusts (REITs) are funds that are valued based on the net asset value of the properties held. Some focus on commercial estates, others can be geared more towards residential exposure.
Rate cuts should help these shares to increase, as it should stimulate demand for the property market. Lower borrowing costs could also fuel new acquisitions. Higher customer demand could enable higher dividend payments from the REITs to shareholders.
Buy dividend stalwarts
If rate cuts do materialise in the early spring, finding good income sources above 5% from the money market could dry up. From that angle, we’d like to buy dividend shares, with our UK home bias providing some nice options even now.
For example, well-known names such as ITV (LSE: ITV) (7.89%), NatWest Group (LSE: NWG) (7.15%) and Glencore (LSE: GLEN) (6.75%) would fit the bill.
Sell USD/JPY
The only central bank in the G10 space that won’t be cutting rates as the rest do should be the Bank of Japan. In fact, they are looking to exit the negative interest rate policy.
If we pair up the Yen against the greenback at a time when the yield differential between the two should be shrinking, this should act to push the currency pair lower.
Ideas for gold pushing higher…
Gold ETC
A common idea for H1 is that gold should push and potentially make fresh ATHs. We agree with this view, as the metal should gain value should we see rate cuts (i.e. a lower opportunity cost to hold). It should also outperform if we see a risk-off move to open up the year.
The cleanest and simplest way to join this train would be via a gold ETC. An example is the Invesco Physical Gold ETC (SGLP).
Gold 6 month option idea
For those who want to try and make a play via derivatives, we priced up the below idea that we like.
XAU/USD Seagull (6 month expiry, spot ref $2059)
Sell $2000 Put and receive 0.88&
Buy $2100 Call and pay 2.46%
Sell $2200 Call and receive 1.02%
Max payoff 4:1
Gold mining stocks
The correlation between spot gold and the share price of mining stocks isn’t perfect. But for some, getting indirect exposure is a lower-risk play here. Even if gold doesn’t perform as we anticipate, mining stocks could still see share price gains either through general positive market sentiment or through other metals mined. An example is Fresnillo (LSE: FRES).
