Volatility in the energy market and water scarcity concerns on severe drought conditions in the west have helped raise interest in market sectors and exchange traded funds that cover the two areas.
On the upcoming webcast, Riding the Falls in a Barrel: Mixing Oil and Water in a Portfolio, Mark D. Carlson, Senior Investment Strategist for Northern Trust Asset Management, and Michael Natale, National Sales Desk Manager for Northern Trust Asset Management, will discuss the investment opportunities and risks in natural resources, like oil and water.
For example, the FlexShares Morningstar Global Upstream Natural Resource Index Fund (NYSEArca: GUNR) provides exposure to the rising demand for natural resources and tracks global companies in the energy, metals and agriculture sectors, while maintaining a core exposure to the timberlands and water resources sectors.
Specifically, GUNR includes 32.2% energy, 29.6% agriculture, 27.9% metal, 4.9% Timber and 4.8% water.
After being the S&P 500’s worst performer last year, the energy sector has been an attractive play from a so-called mean-reservation perspective – the idea that prices and returns eventually move back towards the mean or average. Now that the energy sector has experienced a large pullback, traders are anticipating the sector will at the very least revert back to its historical average. [Signs of a Return to Energy ETFs]
Additionally, as more begin to think about the consequences of prolonged droughts, especially with headlines on the severity of California’s dry conditions, investors may look at the water industry to invest in potential growth opportunities to meet rising water needs. For instance, Morgan Stanley recently analyzed water risks in food production and discovered that at least a third of global production of wheat, corn and soybeans occur in areas of high water scarcity.
Moreover, growing industries are also consuming more water. For instance, the expanding U.S. hydrualic fracturing sector is water intensive – fracking requires high-pressured water-based fluids to create cracks in rock formations for natural gas and petroleum extraction. [Water ETFs Could Make a Splash on Push for Conservation]
Financial advisors who are interested in learning more about the natural resources can register for the Wednesday, April 22 webcast here.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.