Geopolitical Tensions Make Gold, Oil, and Defense Stocks Must-Have Hedges, Says Top Wealth Manager

On 1 October 2024, Aadil Zaman, a partner at Wall Street Alliance Group, joined CNBC’s Power Lunch to share his thoughts on navigating the current market environment. With geopolitical tensions escalating, especially in the Middle East, and the Federal Reserve monitoring the economy, Zaman outlined a strategy that emphasizes hedging with gold, energy, and defense stocks.

The Wall Street Alliance Group is a financial services firm that provides customized wealth management solutions to individuals and families, particularly focusing on high-net-worth clients such as doctors, attorneys, and corporate executives. Their offerings range from investment strategies to tax planning, risk management, and estate planning. They aim to help their clients grow and protect their assets through tailored financial strategies, drawing on their expertise in the complexities of financial markets and tax regulations. The firm takes a personalized approach to addressing the unique financial goals and challenges of each client, ensuring that their wealth management needs are met with a high level of service and professionalism.

Aadil Zaman is an experienced financial advisor with a strong academic background, holding a bachelor’s degree in Economics and Management from the University of London and an MBA in Finance from the State University of New York at Buffalo. Aadil, a nationally recognized speaker, has been featured in the Wall Street Journal as part of their “Ten Five Star Wealth Managers You Need to Know.” He has also been named to the WealthManagement.com 2019 Thrive list of fastest-growing advisors and the Financial Times 2020 edition of the Top 401 Retirement Advisers.

Zaman’s interview on CNBC began with him discussing Federal Reserve Chairman Jerome Powell’s recent statements, which suggest the central bank will stay flexible and “accommodative” in response to global and economic risks. Zaman believes that while the Fed tries to maintain stability, short-term market corrections could still happen, particularly in response to ongoing geopolitical uncertainty.

For investors, Zaman recommends diversifying their portfolios by increasing exposure to gold and oil stocks as key hedges. He pointed out that gold, represented by the SPDR Gold ETF (GLD), has historically been a solid hedge during geopolitical instability. As volatility rises and the dollar weakens due to potential Fed rate cuts, gold tends to strengthen, making it a safe option for investors looking to protect their portfolios.

Zaman highlighted oil as another crucial hedge, particularly ExxonMobil, which is trading at attractive valuations. With low break-even prices, ExxonMobil can remain profitable even if oil prices drop, and its strong dividend yield makes it an appealing option for investors. Zaman believes that oil plays a unique role in protecting portfolios against the risks of economic downturns and geopolitical instability, especially in light of the situation in the Middle East. Holding oil stocks, in his view, helps investors hedge against market volatility while still capturing growth potential.

He also emphasized the importance of defense stocks, which are likely to benefit from rising geopolitical tensions. Whether the Democrats or Republicans win the upcoming U.S. election, Zaman expects defense spending to increase. He particularly recommended Lockheed Martin as a strong long-term player in this space.

On the broader U.S. economy, Zaman expressed cautious optimism. While short-term risks remain, he doesn’t anticipate a major economic collapse, thanks to the Fed’s current stance. He pointed to Home Depot and American Express as examples of companies poised to benefit from continued consumer spending, especially among affluent customers who are less impacted by minor economic shocks. These stocks offer long-term growth potential, supported by expected interest rate cuts.

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