With weak economic reports mounting it is time to move investments into Treasuries precious metals and cash, writes Mike Larson.
Sometimes, you just have to stop and appreciate how fortunate you really are. That’s how I feel here in South Florida. Hurricane Dorian was poised to deliver a knockout blow but turned away at the last minute. I wish the same could be said for the unfortunate residents of the northern Bahamas. If you can help them recover in the coming days and weeks, I urge you to do so.
Meanwhile, let’s shift back to discussing the markets. When I survey the action of the past few months, I’m reminded of W.B. Yeats’ poem “The Second Coming.” Perhaps you remember these lines from a literature or English class ...
“Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world.”
Yeats wasn’t referring to stocks or bonds. But his words clearly apply today. We’ve seen ever-more volatile market moves lately, with stray presidential tweets and increasingly glum economic reports spurring significant swings of hundreds and hundreds of Dow points both up and down.
The latest example of this came on Tuesday. The Institute for Supply Management released its August data on the manufacturing sector and the figures were ugly across the board.
Most notable: The ISM headline index slumped to 49.1. Not only was that the lowest reading in more than three years, but it signaled the manufacturing sector of the economy is starting to contract. A separate index published by a different research group sank to its lowest level since September 2009.
That follows other recent reports suggesting a cooldown in private construction spending and industrial production, as well as a nascent downturn in job creation. All these signs tell me I’m on the right track with my forecast of a 2020 U.S. recession.
They also continue to underscore the need for a “Safe Money” investment strategy. By that, I mean:
1) Owning/buying U.S. Treasuries or ETFs and mutual funds that hold them on your behalf.
2) Owning/buying gold, silver, and precious metals miners, and
3) Carrying much higher levels of cash than you did from 2009 through Q1 2018.
As for any money you have dedicated to stocks, please dump: Money-losing tech IPOs; offensive, cyclical stocks and banks and other financials. Also dump “yesterday’s winners,” like the once-dominant FAANG names: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Google (GOOG). That stuff is not what you should be focusing on.
Instead, zero in on higher-rated, anti-recession, defensive, dividend-focused stocks. It’s no coincidence that multiple stocks in those sectors (including several I’ve been recommending in my Safe Money Report) either surged to fresh all-time highs or came within a whisker of doing so after that lousy economic data hit on Tuesday.
Finally, I would continue to urge you to play defense in your portfolio. I’m increasingly worried about the potential for greater volatility in the markets over the next couple months – and that will help protect you from the fallout if I’m right.
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