Where to invest US$1 million right now

MORE turbulence ahead – that’s the message investors are getting from Wall Street experts as pressures on financial markets mount. On top of lofty stock valuations fuelled by the hype over artificial intelligence (AI), there’s the high-stakes tariff battle between the US and China, meltdowns in some parts of credit markets, softening job growth and a US government shutdown.

However, overall earnings have been strong, and the S&P 500 has largely powered past any obstacles. The index is up more than 30 per cent since its April low and has gained about 14 per cent for the year. Where jitters have shown up recently is in the price of gold. While still up some 50 per cent for the year, the precious metal plunged by as much as 6.3 per cent on Oct 21, in the metal’s worst rout since 2013.

To look beyond the chaos and identify opportunities, we asked wealth advisers for their take on promising investment areas. 

“The future is metals” Alexandre Tavazzi, head of CIO Office and macro research, Pictet Wealth Management

The idea: The infrastructure of the future is being built today, and it is metal-intensive. Megatrends such as AI and the clean energy revolution are driving record demand for materials like copper and lithium. By investing in these raw materials, you gain access to the physical backbone of tomorrow’s economy. I particularly like asset-heavy companies in this space – companies that have significant physical assets, such as smelters, refineries, land and real estate. They are well-positioned at the heart of these secular trends and provide an inflation hedge as commodity prices rise.

The strategy: If I had US$1 million to deploy, I’d split it into three buckets. First, I would allocate about half to a diversified group of global mining companies with exposure to copper, aluminium, nickel and rare earths. These metals are the building blocks for grid upgrades, electric vehicles and battery storage. Next, I’d dedicate about 30 per cent to direct commodity exchange traded funds, focusing on copper, aluminium and an array of battery components. These instruments are resilient in an inflationary environment and provide a more direct play on metal prices. For the final 20 per cent, I’d target public companies that provide the picks and shovels needed to build energy infrastructure: grid connections, power inverters and advanced storage systems.

Naturally, there are risks. We are living through a period of profound change, and we can’t rule out sharp swings in commodity prices, tariffs, geopolitical shifts and supply chain disruptions. But when you think about the sheer scale of infrastructure still to be built, the long-term case is compelling.

The big picture: The global push to electrify everything from cars to data centres is driving a structural bull market in raw materials. Meanwhile, persistent deficits and fiscal spending in major economies raise questions about what defines “risk-free” financial assets. That’s why I’m looking for real assets – those with an intrinsic value that is derived from their scarcity due to supply constraints. These kinds of assets are less vulnerable to political dynamics, including efforts to pressure central banks to keep borrowing costs low.

“Focus on healthcare” Ron Sanchez, chief investment officer, Fiduciary Trust Co International

The idea: There aren’t quick, cheap investment ideas or opportunities today given that we’re in the third year of double-digit price increases for the S&P 500. That said, in equities I see narrower and more select opportunities in healthcare.

The strategy: Equity markets are expensive, with even traditionally defensive stocks such as utilities trading at elevated premiums. The notable exception is healthcare. For a host of reasons, including regulatory issues and drug price concerns, the sector has struggled. In general, investors want to look for assets trading at less than their historical premium. And while the S&P 500 is trading at a forward price-earnings (PE) multiple of 22.4, healthcare is trading at a forward PE of 17.3. Healthcare traded at a modest discount to the broad equity market for most of the past decade, but that discount has widened way out to about 40 per cent since 2023.

From a risk management standpoint, the top two companies in the S&P 500, Nvidia and Microsoft, combine to make up nearly 15 per cent of the index, so obviously there is a high correlation there. The entire healthcare sector, meanwhile, is 9 per cent of the index. With Nvidia, who knows what will happen, but there is a lot of risk associated with a single theme, and in the tech world, things can become obsolete in five to 10 years. That is not a forecast for Nvidia, but there is an underlying risk for something that has grown to that size.

Healthcare is one of the most diversified sectors in the S&P 500, with everything from drug companies to biotech to equipment makers. Although there are near-term challenges, political as they may be, the demand and interest in healthcare services and drugs are not particularly vulnerable and will not go out of favour. With ageing populations here and abroad, demand for these services is as good as it’s been. There are growth opportunities, and some parts of the sector can be defensive.

The big picture: Valuations on a lot of assets in the public and private markets are at rich levels by historical standards. You can make a similar assessment outside of the traditional financial world to include crypto, gold, art and sports teams. There are also concerns about risk management, with worries about concentration and correlation in the S&P 500. Just 10 companies make up about 38 per cent of the index. As those companies go, so will the rest of the index go.