12/27/22 Outlook 2023 Investors were underweight gold in 2022, don't make the same mistake in 2023 - Frank Holmes

(Kitco News) - Investors will soon be closing the book on 2022, and it has been an unprecedented year, to say the least.

Inflation has risen to its highest level since the 1980s, forcing the Federal Reserve to raise interest rates at the fastest pace in more than 40 years. This past year, the U.S. central bank has increased interest rates by 425 basis points. 

It has been a challenging year for most investors as the traditional 60/40 portfolio allocation has seen its worst losses since the 1930s. The Federal Reserve’s aggressive monetary policy has pushed bond yields to their highest level in more than a decade and the U.S. dollar saw a 20-year high this past year.

The global economy balances on the brink of a recession as food and energy prices remain elevated. With so much uncertainty, investors are left wondering how they should build a portfolio for the new year.

Kitco News is once again reaching out to the experts to ask them where they are investing their money in 2023.

Expert: Frank Holmes
Claim to Fame: CEO and chief investment officer of U.S. Global Investors

How would you invest $100,000 in the 2023

When it comes to investing, no matter the year, it always comes down to an individual’s age. For example, if you’re 50 years old, I believe you should have 50% of your portfolio in equities and 50% in short-term income. Let’s say you’re 70 years old, then 70% of your portfolio should be in income, and 30% should be in equities. Now, I also always advocate that your of the equity portion of your portfolio, 10% of that should be in gold (5% in bullion and 5% in high-quality gold stocks or ETFs).

What are your thoughts on a potential recession and how will that impact your investment decisions in 2023?

I believe an impending recession will impact everyone’s investment decisions heading into 2023. The real question here is not IF there will be a recession, because it looks like there surely will be, but whether it will be a hard or a soft landing.

What are your top 3 investments for 2023 and why?

Personally, my top three investment areas for the new year focus on 1) global resources – a higher percentage here, 2) the global shipping industry because it has pricing power and because I believe mean reversion is set to take place with PMI, and finally 3) the luxury goods market, which also has incredibly pricing power, globally.

What investments would you avoid in the new year and why?

I personally believe that tax rates could go up next year, so moving into 2023 I would avoid government bonds. I would rather put my money in something that is tax free.

What is your final word for 2022?

In 2022, I think investors underweighted gold in their portfolios, and perhaps this will change in the new year. In addition, in 2022 central banks consumed more gold than we have seen in living memory. Essentially, central banks are trying to hedge against their very policies.