Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis

Stock-Markets / Financial Crisis 2017 Jul 20, 2017 - 04:08 PM GMT

By: John_Mauldin

Stock-Markets

By Jake Weber : No one knows when the next financial crisis will hit.

The 2008 financial crisis originated in sub-prime mortgages. Rampant speculation in dot-com stocks triggered a market panic in the early 2000s.

What will spark the next crisis?

Fed Chair Janet Yellen said last month that she didn’t expect a financial crisis in our lifetimes…. Of course, later she downplayed her comments, but it doesn’t change the message.


And if we’ve learned anything from the past, the most reassuring Fed rhetoric comes at times when we should be worried the most

After all, it’s the Fed’s job to instill confidence in the market.

That’s why now is a good time to review your portfolio and make sure you’re prepared for a black swan of any sort.

Here are my favorite assets classes/sectors that hold up best in financial crises.

Consumer Staple Stocks

Unless you’re a market oracle, a 100% allocation in cash is not your best move. Bull markets tend to last longer than most people think. So you want to be prudent yet open to the upside potential.

What is the single-best sector to invest in if you’re worried about a market crash?

The answer is in the table below.

This table shows the performance of market sectors if you invested in each at the peak date for the S&P 500 to its trough date for the Dot-Com Crash and 2008 Financial Crisis.

In both market crashes, consumer staples have held up best. No matter how bad the economy, people still need to eat, brush their teeth, and buy medicine.

Buying the best consumer staples stocks is not going to protect you from losses in a stock market crash. But if history is any guide, the sector should fare better than the rest of the market.

Gold

If you look for the best asset class to hedge your portfolio against a financial crisis, look no further than gold. 

In the Dot-Com Crash and the 2008 Financial Crisis, gold saw positive gains. When the S&P 500 dropped -22% in 2001, gold staged an impressive 25% rally.

Make no mistake, gold isn’t just a hedge against financial crisis.

It has been a safe and lucrative place to allocate some cash since the turn of the century. Gold had a notable run with 12 consecutive years of positive returns, enduring two financial crises and outperforming the S&P 500 in eight of those years.

Cash

This advice may sound too obvious, but it’s more of a reminder. Because greed and promised returns often take hold of our common sense.

This is especially true when people seem to be making money in just about every asset class—or as my colleague Jared Dillian (a former Lehman Brothers trader) refers to it, the everything bubble

It’s been over a year since the S&P 500 saw its last correction. Its market capitalization soared by 29% in the first half of the year, 23% of which is attributed to the five stocks, aka FAANG!

Don’t let the fear of missing out guide your investment decisions. If you’re sitting on big gains, especially in the FAANG stocks, it’s a good time to cash in.

Act Now

Don’t be fooled by Janet Yellen.

The Fed’s policies have done nothing to restore the economy. This stock market rally has been driven by stimulus, not fundamentals. This won’t last forever.

A more hawkish Fed signals that the Fed has reached the end of its rope. Now it’s only a matter of time before the stuff hits the fan.

The three asset classes in this article are a good starting point in building a bullet-proof portfolio for the next crisis. However, if you want get into the weeds, I suggest the free weekly newsletter by Jared Dillian, a colleague of mine who was the head of ETF trading at Lehman Brothers in the midst of the 2008 crash.

Nobody can guide you better than a former Wall street trader who faced the crisis first-hand. But don’t wait too long—time is not on your side.

Get Thought-Provoking Contrarian Insights from Jared Dillian

Meet Jared Dillian, former Wall Street trader, fearless contrarian, and maybe the most original investment analyst and writer today. His weekly newsletter, The 10th Man, will not just make you a better investor—it’s also truly addictive. Get it free in your inbox every Thursday.

John Mauldin Archive

© 2005-2019 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