With U.S. stocks and bonds having one of their worst years in decades, investors may be wondering where they can hide out.
In the latest installment of our series “What to do in a bear market,” Yahoo Finance asked the experts where they’re included to put money amid volatile times.
Where can investors hide in the event of another downturn as the Fed continues to tighten?
Bear markets are painful, but they eventually pass, says Sylvia Jablonski CIO of Defiance ETFs.
Jablonski advises defensive sectors like healthcare, consumer staples and utilities — with stocks that pay dividends which help boost returns when equity prices are falling. She is also focused on high-quality companies.
“During uncertain markets like the one we are experiencing, I’m focused on old tech. I’d like to buy Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Google (GOOGL, GOOG), for example, who are cash cows, have strong cashflow dynamics, 30% or so margins in some cases, pricing power, and are part of the secular tech growth trend,” she said.
“I would stay away from new tech like some of the pure growth types of trades that do not stand up in terms of balance sheet, and will be hurt by higher rates,” Jablonski said, citing examples such as Peloton (PTON), Roku (ROKU), Zoom (ZM).
Some strategists are keeping cash on the sidelines, and leaning into commodities.
“Our single largest active overweight call remains to be in cash and commodities. We just think it’s a hedge against anything bad happening,“ says chief investment strategist Gaurav Mallik of State Street Global Advisors.
He also highlights incremental exposure to European assets relative to the US. “In Europe’s case, financial conditions are extremely tight. Which means there could be some positive surprise from the ECB [European Central Bank],” he said.
“The earnings have been very strong in Europe. In fact sales growth has been better than the US in Q2,” added Mallik.
"Dividend stocks have been the best oasis since the market peaked on November 19th [2021]," said Louis Navellier, chief investment officer of asset manager Navellier & Associates.
"Domestic stocks have a natural advantage over multi-international stocks that are being hurt by a strong U.S. dollar," he added, citing names like Alliance Resource Partners (ARLP), Coterra Energy (CTRA), Devon Energy (DVN) & Hess Midstream (HESM).
Is it advisable to short stocks at this point?
"No, you could get buried in a short squeeze if you short at this time," said Navellier. "I think the stock market could explode to the upside when the Fed raises key interest rates on September 21st, since that could be the last rate hike."