How to Invest $10,000 Right Now
Four investment experts point to promise in out-of-favor chips, gold, value stocks and more.
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On paper, there’s a lot to like about the US economy and stock market. In reality, many Americans aren’t feeling it.
The Federal Reserve has cut interest rates, unemployment is low and the S&P 500 is two years into a bull run. Yet a measure of how US consumers view their current financial situation is at its lowest since the end of 2022, and they expect high prices to outpace income gains over the next year, according to a recent reading of the University of Michigan Consumer Sentiment Index.
When Bloomberg asked four experts where to invest $10,000 right now, their responses underscored a tension between sunny prospects and concerns over underlying economic issues that could darken that outlook. Some say the future for risk assets is bright. Others worry about geopolitics and potential economic clouds on the horizon — such as inflation that reignites — and favor hedging riskier bets with short-term Treasuries or gold.
When asked what they would do if given $10,000 to spend on something fun, answers ranged from a yoga retreat in Bali to the allure of beekeeping.
For those who want to invest using exchange-traded funds as rough proxies for the investor’s themes, Bloomberg Intelligence ETF research associate Andre Yapp sorts through the possibilities.
Before putting money into the markets, be sure to check if there are other moves you can make to shore up your financial picture. For ideas, take a look at The 7 Habits of Highly Effective Investors.
Read more: Are you Rich?
Liz Young Thomas, head of investment strategy, SoFi
Balance Risks and Opportunities
The idea: I’d put half in dividend-paying stocks and half in short-term Treasuries or gold.
The strategy:
I think the Fed cutting cycle will wind up being more aggressive than it’s projecting, so the short-end of the yield curve likely falls further and the long end will have volatility. With the short-end of the yield curve falling but the economy staying stable, you want some exposure to stocks. But I think people are prematurely declaring that we’ve secured a soft landing, so you want something that will do well just in case that’s not true.
The S&P 500 yield is around 1.3% and you can find an ETF with a diversified basket of dividend-paying stocks at about 4%. I’d screen the dividend-paying ETFs for quality and eyeball the sector weightings. If an ETF has 50% of its weight in two sectors, you’re not really diversified. In most dividend-paying ETFs you find utilities and consumer staples as two of the largest sectors, but you can also find ETFs with notable exposure to real estate, industrials and communications.
On the defensive side, I’d look to short-term Treasuries, which have seen a recent rise in yields (i.e., fall in prices), making this a more attractive entry point than just one month ago. Although gold has had a great run, I still think it’s a decent place to be. It’s a zero-yielding asset, but I don’t think global currency volatility is over and gold continues to be a solid option if you can buy it on a dip.
The big picture: Since I think it’s too soon to declare a soft landing, investors should keep their risks and opportunities balanced.
Sarah Ketterer, chief executive officer, Causeway Capital Management
Cyclical Chip Plays
The idea: While AI-enabling semiconductor stocks have soared this year, industrial and automotive chips have lagged. Despite this underperformance, these companies are poised for a cyclical rebound.
The strategy:
A recovery in orders, driven by industrial automation, robotics, auto manufacturing, and the Internet of Things, appears likely in 2025. Growing demand for data centers also offers significant upside. Currently, data centers account for over 2% of global energy consumption, which is projected to rise to 7% by 2030, matching India’s current consumption. Industrial semiconductor companies play a crucial role in this shift, enabling efficient power conversion, increasing power densities and lowering data center costs.
These companies are also key players in the automotive transition, producing powertrain microcontrollers that manage real-time engine processing for electric vehicles, advanced driver-assistance systems and domain controllers.
The big picture: Despite short-term challenges like weak demand and inventory adjustments, these firms generate strong cash flow and maintain modest financial leverage. With inevitable growth in industrial and automotive demand, they represent a compelling investment opportunity.
Ian Harnett, chief investment strategist, Absolute Strategy Research
Favor Value Plays
The idea: A stronger economic environment should favor value stocks and cyclical sectors such as industrials, rather than the growth stocks and tech companies that have done so well in 2024. Similarly, cyclical equity markets such as the Eurozone or Korea could outperform the US for a period. If inflation risks start to reenter the market, we could see industrial metals such as copper and platinum rally.
The strategy:
Interest rates have probably peaked for this cycle. However, unlike in most economic cycles of the last 50 years, rates are coming down because inflation is moderating, rather than due to recession, rising unemployment or a financial crisis.
Despite all the noise surrounding the talk of US recession, the economy looks to be having a soft landing. Real labor incomes are growing and helping to sustain consumer spending, while unemployment claims remain subdued. Corporate profit growth remains strong, margins are healthy and bankruptcies have started to slow as have corporate credit defaults.
The combination of lower rates boosting liquidity and double-digit S&P 500 profit growth sustaining employment is pretty unique in the last 50 years. The only times close to this combination were 1995 and 1998. In each case the Fed cut rates and there was no subsequent recession. Equities gained over 20% in the 12 months following the start of each of those rate-cutting cycles. If we add the possibility that the recently announced Chinese stimulus package might help stabilize that economy as well, the prospect of further gains for most risk assets is high.
The big picture: What might derail this positive view, other than a major unanticipated global geopolitical event or US election shock? It could be the recognition that you can have too much of a good thing, with investors beginning to recognize that inflation reaccelerating in 2025 might be a bigger risk than any recession fears.
Russ Koesterich, portfolio manager, BlackRock Global Allocation Fund
Go for Gold
The idea: I see a case for including a modest 2% to 5% allocation to gold in most portfolios. While gold has been an inconsistent hedge, it’s a reliable long-term store of value.
The strategy:
Many investors, including myself, were frustrated with gold in 2021 and 2022. Amidst the biggest surge in inflation in 40 years, gold traded sideways. In contrast, during the past year gold has been one of the best-performing asset classes, gaining more than 40%.
Looking at the past six months, both the dollar and real interest rates have turned from headwinds to tailwinds. In recent months, the historically negative relationship between gold and the dollar has reasserted itself. A similar dynamic holds for real rates.
In addition to an inflection in the macro-outlook, there are several long-term drivers supporting gold. Central banks continue to add the precious metal to their portfolios. At the same time, individual and institutional investors are rediscovering the virtues of gold as governments rack up huge budget deficits, in the process creating stratospheric debt-to-GDP ratios last seen in the aftermath of World War II.
The big picture: With the economy slowing, central banks easing and governments still adding debt at an unsustainable pace, gold makes sense, particularly if we see continued weakness in the dollar.