In Europe, think Spain and France
And while I'm on macro trends for the fourth quarter, who can forget the eurozone debt crisis? In my column on fourth-quarter macro trends I wrote: "The European debt crisis will move from full boil back to simmer in the quarter. Greece will get its next payment from the bailout fund sometime in November and be able to keep the lights on for a few more months, and the Spanish government will make a formal request for a program of bond buying by the European Central Bank in November."
If that forecast turns out to be an accurate, then I think you'll want to own a bit of Spain. My suggestions would be Spanish banks such as Banco Bilbao Vizcaya (BBVA) and Banco Santander (SAN), members of my Jubak's Picks and dividend income portfolios, respectively -- because that's where you'll get the biggest short-term relief bounce. A relief bounce in Europe, combined with expectations for faster growth in China, would also give some loft to shares of European exporters. Here, my suggestions would run to luxury-goods makers such as LVMH Louis Vuitton Moët Hennessy (LVMH).
Timing your moves
I have three major caveats to all this planning.
First, the basic macro trends scenario for the quarter could wind up going to the 35% instead of the 65%. I'd be watching carefully to see if China does indeed rally on expectations. If you don't see that rally by early November, it would be time to get more conservative. Europe provides a very clear timetable. If there is no formal Spanish request for bond-buying aid in November, I'd scale back the odds in favor of a positive macro trend background for stocks in the fourth quarter.
What does getting more conservative mean? For starters, it means increasing your weighting to domestic companies in the best game in town, the U.S. economy. The U.S. housing sector is a good way to do that. It also means favoring dividend stocks -- but you're already doing that, right? You should be on constant lookout for any dip that gives you a shot at picking up a 4% to 5% yield, currently the dividend sweet spot. It means looking at domestic growth stocks in emerging economies rather than export-oriented growth stocks. And it means continuing to look to gold as a hedge.
My second caveat is to stay alert to possible disrupters. A big disrupter would be an Israeli or U.S./Israeli attack on Iran's nuclear facilities. The likely Iranian response would attempt to disrupt global oil traffic through the Strait of Hormuz. If that happens, you'd certainly like to own stocks in oil producers that don't send much, if any, oil on that route. Norway's Statoil (STO) fits that description, and it also pays a 4.2% dividend. You might also consider U.S. producers such as Pioneer Natural Resources (PXD) and Colombia's Pacific Rubiales Energy (PEGFF).
And my third caveat is a reminder that while I'm relatively positive on macro trends in the fourth quarter, I don't see the quarter providing solutions to the problems that have produced such huge swings from fear to hope and back again in 2011 and 2012. This isn't a time to fall in love with the stocks in your portfolio. Look to take profits when valuations reach your targets, and keep your eyes peeled for indications that the first quarter of 2013 will look much less positive.
Updates to Jubak's Picks
These recent blog posts contain updates to the stocks in Jubak's market-beating portfolios:
- Stillwater shares recover as strike settles
- Why Xylem is looking better
- Price worries in the rare-earth markets
- Nestlé benefits from China wage increase
- Apple's hidden competitive advantage
At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this column in his personal portfolio. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any company mentioned in this column. The fund did own shares of Apple, Banco Bilbao Vizcaya, Banco Santander, Freeport-McMoRan Copper & Gold, Home Inns and Hotels Management, Lennar, LVMH Louis Vuitton Moët Hennessy, Pacific Rubiales Energy, Ping An Insurance, Statoil, Tencent and Tingyi as of the end of June. Find a full list of the stocks in the fund as of the end of June here.
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Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.
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