Safe Havens and Currencies

09/22/2015 9:00 am EST


Mary Anne & Pamela Aden

Co-Editors, The Aden Forecast

The market is signaling it’s going to get worse before it gets better. If so, this suggests it’s just a matter of time before the next recession hits, not only in the US but internationally as well, cautions Mary Anne and Pamela Aden, editors of The Aden Forecast.

As we all know, few economies have gone a decade without a recession. So based on timing alone, this recovery is maturing. 

We believe the best strategy is to have a large portion in cash. We recommend keeping 45% of your total portfolio essentially balanced between the US dollar and some of the currencies.

This may not be the case for long, but it’s the safest for the time being while we wait for new opportunities.

We also recommend keeping a 40% position in US government bonds. They’re still a safe haven, and if the global economy stays sluggish or weak as we suspect, they’ll continue to do well.

And finally, we’re keeping our small 15% position in the metals sector. For now, it’s basically an insurance policy against a financial crisis.

Hopefully it won’t happen, but the way things are looking, it’s best to play it safe across the board.

We didn’t like selling all of our recommended stocks.  Nevertheless, we have to go with what the market’s telling us and for now it’s saying to stay on the sidelines.

Sure we hope to see the market bounce back soon. But until we do, we recommend staying safe and out of harm’s way.

If you’re still holding some stocks, then please put stop losses on your positions. You can decide what works for you, but under the circumstances, we’d keep these tight at no more than 10% below current prices.

Meanwhile, the euro and British pound should both benefit as safe havens too, at least for a while. Europe’s four biggest economies are growing and they’re looking better.

Currently, we still recommend keeping about half of your cash (20%) divided between the euro, British pound, and Canadian dollar. The latter has been hit hard by the decline in oil; it’s likely near the lows.

Among ETFs, the recommended funds are the Guggenheim CurrencyShares Euro Trust (FXE), Guggenheim CurrencyShares British (FXB), and Guggenheim CurrencyShares Canadian (FXC).

The US dollar continues to form a top and the major currencies are bottoming.

The US dollar index could stay firm for a while longer. However, once the index declines below 93, it’ll be a strong sign of a start to a steep decline.

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