Weed, Oil, Silver: 5 Bets for Best ETFs in 2024

From MISL to DBA, these funds should help weather volatile markets.

AndrewHecht310x310
|
Reviewed by: Mark Nacinovich
,
Edited by: Lou Carlozo

As 2024 unfolds from what was a surprising 2023, investors tasked with sizing up the economic and geopolitical issues that shaped the previous year may see volatility ahead.

On the economic side, the Federal Reserve injected optimism into markets when earlier this month it forecast rate cuts for the coming year as inflation has receded.  

On the geopolitical front, wars in Ukraine and the Middle East, along with the bifurcation of the world’s nuclear powers, threaten world peace. Moreover, with a highly contentious U.S. election on the horizon, U.S. energy and foreign policy initiatives remain uncertain, and uncertainty tends to increase the odds of volatility across all asset classes.  

My best bets for 2024 include exchange-traded funds that are in the best position to weather volatility. Here are a five of them. 

Marijuana ETF 

The Biden administration and Congress have dragged their feet on legalizing marijuana, but close 2024 election could cause a push for federal legalization, which would open banking lines and financing for marijuana-related companies.

The AdvisorsShares Pure Cannabis ETF (YOLO) owns shares in mid- and small-cap global companies that derive at least 50% of their net revenue from marijuana and hemp industries. U.S. federal legalization would likely drive YOLO shares higher. At $3 per share on Dec. 29, YOLO had around $37.5 million in assets under management. It charges a 1.03% management fee.  

Agricultural ETF  

The Invesco DB Agriculture Fund (DBA) tracks an index of 10 agricultural futures contracts in grains, oilseeds, soft commodities and animal proteins. The world’s population stands at eight billion and is growing, and so each year, demand for agricultural products increases. 

The weather conditions in critical growing regions and crop diseases can cause price spikes when shortages occur, and inflation has caused the production costs to increase. Moreover, the wars in Ukraine and the Middle East can disrupt supply chains. Agricultural products feed and increasingly power the world.  

DBA was stable in 2023, only slightly higher than its 2022 closing price. Allocating a small percentage of portfolios in agricultural commodities could lead to significant gains if prices move higher in 2024. At just below $21 per share on Dec. 29, DBA had more than $780 million in assets under management. It has a 0.93% expense ratio. 

Oil ETF 

Brent crude oil is the pricing benchmark for about two-thirds of the world’s petroleum production. U.S. energy policy has increased OPEC+’s pricing power, which should keep prices elevated in 2024. Moreover, the wars around the world could disrupt petroleum supply chains and lead to higher prices.  

Meanwhile, the U.S. has become a crude oil buyer as it replaces its Strategic Petroleum Reserve, which is now at the lowest level in four decades. The United States Brent Oil Fund LP (BNO) tracks Brent crude oil futures prices. At $27.50 per share as of Dec. 29, BNO had $144 million in assets under management. Its expense ratio is 1%. 

Silver ETF 

Gold prices reached a new all-time high of $2,093 on Dec. 27. Silver tends to follow gold prices higher or lower and is a more speculative and volatile metal. Therefore, silver tends to outperform gold on the upside and underperform on the downside on a percentage basis.  

The rising odds of a BRICS currency with gold backing to challenge the U.S. dollar’s dominance as the world’s reserve currency could lift the metal’s prices to new highs in 2024. 

Meanwhile, gold has followed a bullish trend since 1999. If gold continues to hit successive highs, silver will likely follow. A break over silver’s $30 technical resistance level could cause speculators to pile into the silver market.

The iShares Silver Trust (SLV) holds the physical metal and does an excellent job tracking silver prices. At just below $22 per share on Dec. 29, SLV had $10.6 billion in assets under management. It has an 0.50% expense ratio.  

Defense ETF 

The bifurcation of the world’s nuclear powers and the wars in Ukraine and Gaza have moved the Doomsday Clock to the closest to global catastrophe in history. 

Although the odds of a nuclear war remain low, countries worldwide will increase their military spending, which will create a windfall of profits for defense contractors. 

The First Trust Indxx Aerospace & Defense ETF (MISL) tracks a market cap-weighted index of 50 U.S. companies involved in advanced and traditional aerospace and defense. At roughly $25.50 per share on Dec. 29, MISL had $44 million in assets under management. It charges a 0.60% management fee. MISL will likely rise with defense spending in 2024.  

Conclusion

Protecting capital is critical in uncertain times. While YOLO and SLV are highly speculative products, DBA, BNO and MISL represent essential commodities and defense contracting that could offer substantial profits in the coming year.  

Andrew Hecht is a Nevada-based writer and analyst covering stocks, bonds, foreign exchange, cryptocurrency and raw material markets. He has over four decades of experience in markets across all asset classes, concentrating on commodity markets. Hecht was a senior trader at Salomon Brothers in the 1980s and 1990s, running sales and trading businesses. In 2013, McGraw Hill published his book, “How to Make Money in Commodities."