Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
The Greatest Investing Lesson Learned from the 1987 Stock Market Crash - 20th Oct 17
Stock Market Time to Go All-in. Short, That Is - 19th Oct 17
How Gold Bullion Protects From Conflict And War - 19th Oct 17
Stock Market Super Cycle Wave C May Have Started - 19th Oct 17
Negative Expectations, Will the Stock Market Correct? - 19th Oct 17
Knowing the Factors Affect your Car Insurance Premium - 19th Oct 17
Getting Your Feet Wet In Crypto Currencies - 19th Oct 17
10 Years Ago Today a Stocks Bear Market Started - 19th Oct 17
1987 Stock Market Crash 30th Anniversary Greatest Investing Lesson Learned - 19th Oct 17
Virgin Media Broadband Down, Catastrophic UK Wide Failure! - 19th Oct 17
The Passive Investing Bubble May Trigger A Massive Exodus from Stocks - 18th Oct 17
Gold Is In A Dangerous Spot - 18th Oct 17
History Says Global Debt Levels Will Lead to Another Crisis - 18th Oct 17
Deflation Basics Series: The Quantity Theory of Money - 18th Oct 17
Attractive European Countries for Foreign Investors - 18th Oct 17
Financial Transcription Services – What investors should know about them - 18th Oct 17
Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures - 18th Oct 17
Surge in UK Race Hate Crimes, Micro-Racism, Sheffield, Millhouses Park, Black on Asian - 18th Oct 17
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17
Q4 Pivot View for Stocks and Gold - 14th Oct 17
Gold Mining Stocks Q3’17 Preview - 14th Oct 17
U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold - 14th Oct 17
Yuan and Gold - 14th Oct 17
Tips for Avoiding a Debt Meltdown - 14th Oct 17
Bitcoin Hits New All-Time High Above $5,000 As Lagarde Concedes Defeat and Jamie Demon Shuts Up - 13th Oct 17
Golden Age for GOLD, Dark Age for the Stock Market - 13th Oct 17
The Struggle for Bolivia Is About to Begin - 13th Oct 17
3 Reasons to Take Your Invoicing Process Mobile - 13th Oct 17
What Happens When Amey Fells All of a Streets Trees (Sheffield Tree Fellings) - Video - 13th Oct 17
Stock Market Charts Show Smart Money And Dumb Money Are Moving In Opposite Directions—Here’s Why - 12th Oct 17
Your Pension Is a Lie: There’s $210 Trillion of Liabilities Our Government Can’t Fulfill - 12th Oct 17
Two Highly Recommended Books from Bob Prechter - 12th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

The 2 Best Assets to Own While Waiting for a Recession

Stock-Markets / Investing 2017 Apr 06, 2017 - 02:05 PM GMT

By: John_Mauldin

Stock-Markets

BY STEPHEN MCBRIDE : The current bull market celebrated its eighth birthday on March 9. At 96-months long, it’s now the second longest in history.

However, with the S&P 500 set to have its worst monthly performance in over a year and the DJIA down six days in a row, questions have arisen about how much longer this run can continue.


As bull markets usually end with sharp declines, now could be the time for investors to recession-proof their portfolios.

With that said, what are the best assets to own during a downturn?

Fool-Proof Protection

This chart shows Treasuries and cash were the best performers across 2002 and 2008—the two worst years for markets in recent history.

Investors want to have both Treasuries and cash in their portfolios when the next downturn arrives. However, as these assets are ultra-defensive, they won’t yield decent returns as they lie in wait for the recession.

But there is one asset that’s not included in this chart… and it just so happens it’s the best performing asset since 2000.

Asset #1: Gold—Beat S&P 500 Eight Times Since 2001

As we’ve written about before, a major reason to hold gold in your portfolio is its negative correlation to stocks. This correlation has been at all-time lows lately. In other words, gold zigs when stocks zag.

Gold was up 24.7% in 2002 and 2.7% in 2008.

But gold doesn’t just do well in bad times. Since 2001, gold has finished the year ahead of the S&P 500 eight times and been the best-performing asset.

For real returns, however, we should also consider equities. Besides, the long-term track record of equities makes them a mandatory holding.

So, what stock market sectors hold up best in a downturn?

Asset #2: Consumer Staples—The Best Performing Asset in Late Stages of Bull Markets

Even in the worst of times, consumers still buy the same amounts of staple goods like toothpaste and toilet paper.

In such times, the key is to have a system that can guide you through emotional markets. (Grab our free report 3 Proven Strategies for Investing in Uncertain Markets Like These to learn how to invest in times like these.)

Historically, consumer staples have held up best out of any sector during hard times.

When the S&P 500 plummeted 49% during the dot-com crash, consumer staples as a group were up 1.2%. Although they fell 29% from peak to trough during the financial crisis, they performed the best of any sector.

Over the same period, the S&P 500 fell 57%.

Staples don’t just do well when the bad times hit either.

A 2015 report from Ned Davis Research found consumer staples were the best performing sector of the stock market in the late stages of every bull market since 1970.

Their ability to hold up during hard times is a major reason they are the best performing sector over past decade. Over the past 10 years, staples have generated annualized returns of 9.93%.

Another benefit staples provide is their low volatility. Companies in the sector rarely experience sharp price declines. Because of this, they have had the fewest bear markets of any S&P sector.

McKinsey found that earnings in this sector remained nearly steady in every recession dating back to 1980. Put simply, consumer staples are cycle-agnostic.

But there’s another reason behind the stability of this sector.

Consumer staples perform well in downturns also because of their reputation as high-quality dividend stocks. If a company can pay out even in the worst of times, investors will buy it.

The average staples company has increased their dividend by an annual rate of 8% since 1996. Over 25% of the S&P 500 Dividend Aristocrats Index, an index made up of firms that have increased dividends for the last 25 consecutive years, are staples companies.

Final Thoughts

This bull market could pop soon or go on for another year—nobody knows. Treasuries and gold offer the best protection in a recession. But you may be missing on decent gains in the meantime.

That’s why we also suggest considering consumer staples that are a relatively safe and lucrative place to put your capital while waiting for the storm to hit.

FREE PREMIUM REPORTS: 3 Stocks You Need (and 3 You Don’t) in 2017

Discover the best and worst stocks in 2017. This bundled series of exclusive reports reveals three companies set to soar and three you should steer clear of (one of them will surprise you). Download Three Deadly Dow Stocks and Three Top Picks for Income & Growth for free now.

John Mauldin Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife