Recent stock market declines most likely represent a short-term correction – not another crash – and plenty of investment opportunities continue to exist, according to Donald Coxe, strategy advisor at BMO Capital Markets (TSX:BMO).

In his latest Basic Points report entitled June Reflections: Summer’s Storms and Norms, Coxe outlines a number of investment recommendations for investors. He says another major stock market crash is an “unlikely outcome,” but that the collapse of some major European banks could raise the risk of this occurrence.

Coxe urges Canadian investors to look to emerging markets for investment opportunities.

“Remain invested in companies which produce what China and India need,” he recommends. “No matter what happens in the OECD, these economies will continue to grow faster than the U.S. or Europe.”

He notes that the governments in these countries are not carrying debt levels as unmanageable as those facing many developed countries.

In the energy sector, Coxe urges investors to look to oil sands producers, which are likely to benefit from the BP spill. For instance, he says the spill will remind the public that the large-scale alternatives to oil sands petroleum involve much greater environmental risks, taking some heat off the beleaguered companies. In addition, previous potential for an offshore oil boom has become a bust, freeing up investor capital allocated toward oil stocks to buy oil sands producers’ shares.

Coxe advises investors to resist the urge to invest in any companies connected to the BP spill, even now that BP has somewhat capped the well. He says all parties involved could face lawsuits.

Furthermore, Coxe recommends that investors remain heavily overweight in oil compared with natural gas.

“Gas prices have climbed because of the cutoff of expected production from the Gulf, but this should be only a temporary price boost,” he says. “As Macondo has tragically demonstrated, finding big oil deposits is a high-cost, high-risk business. Finding gigantic natural gas deposits is a low-cost, low-risk business.”

Lastly, Coxe urges investors to hold gold as a hedge against inflation.

“We believe gold should be a significant component in most high net worth wealth preservation programs,” he says.

In a bull market for gold, Coxe adds, well-managed mines will outperform bullion.

IE