The Hottest and Coldest Countries in the World.
The 1 Commodity Most Impacting Global GDP & the Dark Shadows Looming Over the World.
The Hottest Countries
Guyana‘s GDP is predicted to be the highest in the world at 47%. (Keep reading for the event that sparked such a leap.) Columbia will lead Latin America in GDP, at an estimated 5.8% in 2022. Indonesia’s 5.4% 2022 GDP growth projection is one of the strongest in Asia. That compares to a predicted 1.7% in the U.S., 3.3% in China and a recession in Russia and Belarus.
What do the hot countries have in common, in a world where economies are posting much slower growth this year than last? They all export energy products. 3.2 billion barrels of oil was found off the coast of Guyana in 2018. The country began exporting in 2020. In 2021, Colombia was South America’s largest coal producer and second-largest petroleum and other liquids producer, after Brazil (source: EIA.gov). Last year, Indonesia was the world's largest exporter of coal by weight and the seventh-largest exporter of liquefied natural gas (LNG). The country also exports petroleum, and is the world’s largest supplier of nickel. (Watch my webinar on nickel-producing countries.)
Russia is the 3rd largest producer of petroleum in the world (behind the U.S. and Saudi Arabia) and the 2nd largest producer of natural gas (behind the U.S.). However, the Russian economy is expected to contract by -7.8% in 2022, due to the worldwide boycotts, as a result of the country’s invasion of Ukraine (source: Reuters). The paradox is that had Russia not invaded Ukraine, it is unlikely that oil prices would have shot up to $110/barrel. 2021 ended the year at under $70/barrel (still high).
Columbia and Indonesia ETFs
With persistently elevated oil prices, why did the share price of the iShares MSCI Columbia ETF (symbol: ICOL) drop -26% this month? Even strong funds and companies can get drug down in a bear market. Another factor for Colombia was that the country just elected Gustavo Petro, the mayor of Bogota and a former leftwing guerilla fighter. He’s Colombia’s 1st socialist President. President Petro is promising pension reforms that could result in a 3% lowering of GDP for Colombia in 2022, if they materialize. While political reform can be glacial, the kneejerk reaction of investors rarely is.
Is the country oversold? As one of the global leaders of GDP in 2022, is Colombia ripe for buying? While many investors are focusing on oil companies to capitalize on very high oil prices, if you are interested in energy, another play is to add some of these energy exporting emerging economies. There’s always heightened risk when you’re dealing with emerging countries. There can also be greater rewards. The Indonesia iShares MSCI ETF (EIDO) is down about 10% from its 52-week high.
Will Energy Prices Remain So High?
The big question is, “Will oil prices continue to be above $100 a barrel?” Oil prices are highly correlated with war. It takes a lot of oil and gas to fly planes, fuel tanks and truck soldiers to the battlefields. Another key factor to high prices is that Europe remains very dependent upon Russian oil and gas. Demand is high, and Russian boycotts create less supply, and higher prices.
On the other hand, when consumers work-from-home, buy electric vehicles or trim back their travel because gas prices are too high, the plunge can be swift and steep – as we saw in the pandemic. The pandemic lockdowns in March of 2020 were the first time that oil prices were negative – when traders were paying others to take delivery of products they had no way of storing.
Inflation and Interest Rates
Politicians are keen to reduce oil prices as soon as possible to help out their consumers. Central bank governors are jacking up interest rates to battle inflation (of which energy is the biggest driver).
When Will the War End?
Another interesting development is that Western intelligence officials believe that Russia will exhaust their combat capabilities in a few months. Will this end the war in Ukraine?
For now, there seems no end in sight for high oil prices. However, it’s always best to be forward-thinking when investing, and to be mindful of pricing in our entrance and exit strategies. It is certainly in most of our best interests to lower oil and gas prices, stamp-out inflation, and promote and sustain a more peaceful and productive world.
If high energy prices persist, then Columbia, Indonesia, Guyana and other energy exporters (including companies) will benefit. If the war in Ukraine ends or if energy prices abate, what’s good for humanity and the healing of our planet might be very hard on investors’ wallets – particularly if you’ve purchased Chevron, Exxon Mobil or another oil company at an all-time high.
The markets remain volatile, and the risk of a recession is real and heightened. The best approach in times of volatility and uncertainty is to be properly protected and diversified – and to rebalance regularly – particularly if a stock or fund has had a nice run (like both ICOL and EIDO did this year, before the June weakness. Personally, I'm bracing for a potentially hellish summer. However, it's never a matter of being all in or all out.
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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money was released on September 17, 2021.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.