Global X Funds 2017 Outlook

Global X Funds

global-x-build-a-portfolio-to-capitalize-on-long-term-trendsBuild a Portfolio to Capitalize on Long-Term Trends

For the past eight years, investors have enjoyed the rewards of portfolios with broad U.S. equity and fixed-income exposure, but it may be time to alter that approach. U.S. equity valuations are at or near their peak—forward price-to-earnings ratios are about 20% higher than their historical 10-year average—and with bond yields gradually on the rise, trouble may be ahead for traditional fixed-income investments.

How can investors position themselves to achieve their portfolio goals when both major asset classes have worrisome characteristics? Invest with intention: Seek investments or strategies that hone in on specific results, whether that’s growth, income or alignment with one’s personal values. For growth seekers, one strategy is to focus at least a portion of their portfolios on investments that stand to benefit from long-term trends, such as emerging disruptive technologies that can take market share from existing well-entrenched companies. Other avenues for investors to potentially accelerate their portfolio’s growth include strategies that ride on changes in demographics and consumer behaviors, such as the rising spending power of the millennial generation.

That is, finding growth in 2017 and beyond means “looking for areas of the economy with strong tailwinds that can do well even if broader returns are slow,” says Jay Jacobs, director of research at Global X Funds in New York, which offers, among its 55 funds, several that provide exposure to specific long-term themes.

“When people are investing for a specific goal such as growth, they need precise tools to do so. We think there are growth opportunities in long-term, structural, thematic trends,” Jacobs says.

For example, Global X’s Millennials Thematic ETF (MILN) invests in companies that are likely to benefit from that generation’s unique spending patterns and behaviors—patterns and behaviors that are driven in part by the fact that millennials are tech savvy, focused on health and wellness, physically mobile, and prefer experiences over goods. The fund’s current holdings include Amazon, Netflix, Apple and Facebook.

And about those disruptive technologies? Think solar and wind companies in the alternative energy space, or the various categories that are likely to fuel the growth in driverless cars: semiconductor manufacturers, the makers of mapping technology, and robotics and artificial intelligence companies. Other companies to consider under the theme of disruptive technologies include lithium mining companies and battery producers, fintech companies, and social-media companies.

“These are the tech themes that we see emerging over the next decade,” Jacobs says. “The value proposition of that technology is there and it’s starting to reach a scale where it becomes affordable and very disruptive.”

If this sounds like a long-term outlook, that’s because it is. A patient approach can be advantageous to investors, because much of that growth isn’t yet priced into the market. “The market continues to see shorter and shorter holding periods and is more focused on quarterly earnings and what’s happening in the news,” Jacobs says. “If you’re able to take a longer term approach and be very patient with returns, that can be a huge advantage that’s rewarded in the markets.”

Of course, some investors are more interested in generating income and preserving capital than they are in growth. Still, even those goals are likely to be sorely tested by rising rates in coming years. For them, bond alternatives, such as high-dividend stocks, preferred stock, REITs and master limited partnerships are areas to consider. With decent GDP growth, low unemployment, and the glimmer of inflation ahead, dividend stocks and similar investments could appreciate, even if the income component of those stocks is somewhat constrained by rising rates. Still, investors should keep in mind that these bond alternatives carry the risk of having more equity-like risk characteristics than bonds.

Another potential way to invest with intention is for investors to consider “SRI” investing: funds that focus on sustainable, responsible and impact investing. Adding an SRI tilt “is going to become increasingly popular in 2017,” Jacobs says. That can mean a focus on corporate governance, environmental policies or personal values (for example, Global X offers a Catholic Values ETF and a Conscious Companies ETF).

“People are looking for more meaning in investing than just growing their assets. If they can not only stay invested in the markets, but also express what’s important to them, or their personal beliefs, through their investments, I think that’s going to become increasingly popular,” he says.

Global X is a New York-based provider of ETFs, with more than 50 funds available across U.S. and foreign exchanges, spanning a range of investment types, including smart core, income, alpha, risk management and access ETFs.

Click here to visit the 2017 Market Outlook Channel home page.

Hartford Funds

Tackle Today's Market Challenges with a Human-Centric Approach

Investors face myriad challenges as we move into 2017. Elevated equity valuations, rising interest rates, and anticipated volatility are creating an environment in which growing capital is a particularly tough proposition... READ MORE>>


Making the Case for Active Management in 2017

The financial markets are expressing some euphoria over the prospect of a business-friendly environment in coming years, but several factors point to the possibility of higher volatility in 2017 and beyond—and that might spell trouble... READ MORE>>


Finding the Right Investing Tools for Uncertain Times

For investors, the biggest risks often are those that are unforeseeable. But in uncertain times like these, there are specific strategies that can either help investors navigate to higher returns or protect their portfolios from... READ MORE>>

State Street Global Advisors

Managing Risks and Opportunities in the 'New Abnormal'

Get ready to say goodbye to slow growth, low interest rates and benign inflation. Be prepared for the decline of monetary policy as defined by central banks and global institutions. Bid adieu to the embrace of... READ MORE>>


An Asset Allocator's Guide to 2017

Markets seesawed through much of 2016 and, by the eve of the U.S. Presidential election, the S&P 500 Index was up barely 5% for the year, while global markets were up even less. Following the U.S. Presidential election, however, equities moved sharply higher, with the S&P closing out the year up... READ MORE>>

Columbia Threadneedle

Emerging Markets Deserve a Closer Look

Investors seeking to grow their portfolios in 2017 may be too preoccupied with potential opportunities and challenges in the U.S., such as how the election might benefit companies in the infrastructure sector, or what the rising-rate... READ MORE>>