The headlines are scary, but savvy investors should forget about the deficit and inflation for the year ahead, says David Frazier, editor of the ETF investing letter, The ETF Strategist, which helps investors get ahead of major market trends.

Instead, it’s time to buy stocks — and buy them now, while shares still trade near an all-time low relative to future earnings growth.

Importantly, he counsels, ignore advice to buy gold as a hedge against inflation, at least for the foreseeable future.

“I just don’t see inflation going up in any meaningful way, which makes gold a foolish investment,” Frazier says.

“Gold prices are going to trade sideways at best.”

Frazier does expect a significant increase in the deficit in relation to the overall economy, spending that will spur economic growth by the third quarter of this year.

New government spending, while problematic long term, nevertheless will cause stocks to trend substantially higher ahead of the general economic recovery, he says.

Frazier’s advice helped his subscribers to make and to conserve their money last year. His ETF recommendations easily beat the markets, closing the year nearly even as Wall Street analysts and money managers lost up to 60 percent or more of their clients’ funds and the S&P dropped 47 percent.

“I didn’t get lucky, I did my homework,” Frazier says. “And I can tell you, the place to be now is in stocks.”

Frazier currently recommends five ETFs. One recommendation, for instance, holds small-cap stocks, which he says tend to fall farther in a recession but appreciate the fastest during a recovery.

Another is a technology ETF with stock oriented toward helping companies improve productivity, another area that sees an early uptick as stocks recover.

“These stocks,” says Frazier, “are going to have a very good year.”

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Editor's Notes:

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