The global economy faces significant uncertainty. High-interest rates, persistent inflation and geopolitical crises all threaten to roil financial markets. However, these unusual financial conditions create various compelling buying opportunities within the exchange-traded fund (ETF) space. There are ways to profit from the current landscape spanning various countries, sectors and asset classes. Here are three ETFs to buy because they are set to skyrocket in the coming months and years.
SPDR S&P Biotech ETF (XBI)
While tech stocks have generally had a positive 2023, that hasn’t applied to all growth companies equally.
For example, just look at the SPDR S&P Biotech ETF (NYSEARCA:XBI). XBI shares are down 10% year-to-date. Even more shockingly, they are down nearly 25% over the past five years.
Few people would argue that there are long-term tailwinds for biotech thanks to aging demographics along with various breakthroughs in fields such as cell editing, mRNA therapies and synthetic biology. Despite these positives, however, biotech stocks have slumped amid a challenging funding environment and growing pessimism from investors.
It’s certainly not easy to catch a falling knife like XBI stock. However, shares could explode higher at any time. Despite additional market selling in recent weeks, for example, biotech shares garnered attention thanks to a shocking 420% one-day pop in Soleno Therapeutics (NASDAQ:SLNO) on September 26. That sort of move speaks to the possibility for biotech firms with positive clinical results as they snap out of this losing streak.
iShares 20+ Year Treasury Bond ETF (TLT)
U.S. government treasury bonds have had a historic decline. Following a massive rate-hiking campaign from the Federal Reserve, bonds have witnessed their worst bear market in decades. And the selling has continued recently following more concerning comments from the Fed.
Add it all up, and the benchmark iShares 20+ Year Treasury Bond ETF (NYSEARCA:TLT) has fallen back to a price last seen in 2007. But while most folks are dumping their positions, this makes for a compelling buying opportunity for shrewd investors.
Bonds still serve a vital role in people’s portfolios. In particular, they serve as a recession hedge. When the economy slumps, people usually buy bonds for their security during hard times.
With a potential recession seemingly on the horizon, this is a great time to load up on bonds. And with the plunge in prices, yields have soared. TLT shares used to yield just 1.5%, but are now up to 3.6%. With a much higher starting yield and more favorable macroeconomic conditions for bonds on the horizon, this is the time to be buying as others panic.
Global X MSCI Colombia ETF (GXG)
Colombia has had one of the world’s worst-performing equity markets in recent years. Over the past five years, the Global X MSCI Colombia ETF (NYSEARCA:GXG) is down 48%.
Colombia has fallen both due to weak economic performance and the slumping value of its currency, the Colombian Peso. However, the country’s primary export, crude oil, is now surging in value. That should set the stage for a major rebound in the country’s financial assets and associated ETF.
Using cyclically adjusted price-to-earnings ratios (CAPE), Colombia was the second-cheapest market in the world as of August 2023, trailing only Turkey. And, unlike Turkey, Colombia is not facing runaway inflation or a deeply unsettled macroeconomic environment. Furthermore, based on a return to average valuation ratios, Colombia would have the world’s highest forecast returns, coming in at a projected 19.9% annually through 2030.
It isn’t just future capital gains that will power the upside, either. Colombian companies have a long track record of paying above-average dividends. To that point, the GXG ETF currently offers a massive 7% dividend yield.
On the date of publication, Ian Bezek did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
