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If you believe the global economic recovery is firmly on track, where can you find good investment opportunities?

by , 30 July 2014

Many of the world's developed economies appear to be firmly on the road to recovery.

The British economy is back to its pre-financial crisis levels. And whilst the US is still benefitting from the Federal Reserve's stimulus programme, economic indicators are optimistic.

Yes, the South African economy is looking fragile. But if overseas economies continue to grow, SA should benefit from the increased business activity and increased demand for its exports.

So if you want to try to benefit from this stronger global economy, what are your options?

Read on to find out…


The IMF predicts higher global economic growth


The International Monetary Fund (IMF) forecasts increasing economic growth over the next few years as it believes an economic recovery is underway, notes the BBC. For this year, the IMF expects growth to come in at 3.4%. And for 2014, it forecasts a solid 4%.

When economies start to pick up the pace, certain stock market sectors are in a perfect position to benefit.

Think about what happens when economies start to boom… They demand more products. They produce more products. And these products need moved around the world.

And when you move goods across the globe, the easiest and most cost-effective way to do this is by sea, David Eifrig explains. Enormous cargo ships stocked to the gunnels with containers visit ports around the world dropping off and picking up goods.

One way to measure this is the Baltic Dry Index. This is a benchmark of shipping activity. It measures a combination of different shipping prices.

Have a look at the chart below of the Baltic Dry Index from Bloomberg

Chart of Baltic Dry Index

You can see the index is starting to slowly rise again. If the global economy continues to improve as the IMF expects, then shipping rate will rise with it.


How can you benefit from the rise in shipping activity?


An ideal option is to look at the companies involved in the industry. The more products shipped, the more containers needed.

One company perfectly placed to benefit from this move is Trencor. Trencor’s main business is marine containers. Not only that, it’s the main shareholder of Textainer. Textainer is the largest container leasing company in the world.

If economic growth continues to prosper, Trencor is in a perfect position to benefit from the rise in cargo shipping. And benefit from the performance of Textainer.

So there you have it, if you believe the global economic recovery is firmly on track, where you can look to for good investment opportunities.

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If you believe the global economic recovery is firmly on track, where can you find good investment opportunities?
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