Summary:
There are a growing number of concerns about the possibility of a significant market correction that could be approaching. A pair of our 24/7 Wall St. Analysts recently discussed a number of different ways that investors should be preparing for it.
Among the tips shared by Lee Jackson are maintaining exposure to precious metals such as gold and silver, as well as making safer bets in the market overall.
“If you absolutely insist on buying stocks, pick safe stocks right now,” Lee says. “Don’t take flyers. Get some Procter & Gamble (NYSE: PG) | PG Price Prediction, get some Colgate-Palmolive (NYSE: CL), get consumer stocks that pay good dividends. It doesn’t matter what happens in the world because people still need diapers and toothpaste. They still need cigarettes, so Altria (NYSE: MO) is always a good consumer play in our book.”
For additional tips, be sure to watch the video above or read the transcript below.
Transcript:
Doug McIntyre: Yeah. Lee, you hear more and more people saying you’re going to get a sell-off. The number of reasons for a sell-off is going up almost every day. It’s shocking to me that the market hasn’t hit the skids for 20%. So I’m going to say this. It’s going to happen and it’s going to happen by midyear. There’s going to be a 20% correction between now and midyear. What are you going to do?
Lee Jackson: And before I get into this, I think you’re exactly right. And the thing is everybody got so spoiled to just constantly higher highs and new record highs. A lot of people probably forgot we had a 20% sell-off last year. It started in February slowly and by the time early April had rolled around we were at least intraday levels on certain industries in correction or bear market territory.
Doug McIntyre: Yep.
Lee Jackson: So it could happen again. But here’s what you do now, and this one could be different because that one didn’t last at all.
Doug McIntyre: Recovery was very fast.
Lee Jackson: Oh it was. Look at a chart of any indices off early April of last year and it was just a V-shape. Boom, gone. So here are the things that we always recommend and we’re aiming this at Gen Z and boomers and people who are either close to retirement or already in retirement and concerned. One thing you do right away is try to move some items to cash. If you can move to cash, move to cash as much as you can. You don’t have to sell everything but move to cash.
Another big thing to do is if you fancied yourself the Wall Street-type trader, please do yourself a favor and don’t have any margin debt. Do not have margin debt. Using margin when times are good is dicey, but if things get bad and your portfolio is heavily margined you can lose a huge portion of it. You could lose 50% or 60% and you could lose it fast because when markets go down they go down a lot faster than they go up.
Another thing to consider is having some sort of precious metals in your portfolio. Do you want to go to Costco and buy gold? I don’t know if that’s the best trade right now, but have some sort of precious metals position. You can buy miners and you can buy ETFs that hold them. We’ve always recommended this. I wrote about it five or six years ago when miners were near the bottom and we recommended at least a five to six percent position in portfolios. If you had taken that advice three, four, or five years ago you would have done very well. So you can still consider gold and silver.
You can also consider real estate. Real estate loans are not what they were back in 2021 when you could get a 3% mortgage, which was ridiculous. But real estate is still a good place to be. Some of the best money I’ve ever made, even though I’ve been in this business for 35 years and was on Wall Street for 20 years, was in real estate. It’s always something to consider, especially rental real estate like VRBO-type properties or simply rental property where you have a long-term renter.
If you absolutely insist on buying stocks, pick safe stocks right now. Don’t take flyers. Get some Procter & Gamble (NYSE: PG), get some Colgate-Palmolive (NYSE: CL), get consumer stocks that pay good dividends. It doesn’t matter what happens in the world because people still need diapers and toothpaste. They still need cigarettes, so Altria (NYSE: MO) is always a good consumer play in our book.
Also double-check your investments, especially positions in 401(k)s, IRAs, and similar accounts. Make sure all your investments are coded to reinvest both capital gains and dividends. If we do get a big sell-off but it’s something you don’t want to sell like a good Fidelity fund or a good Vanguard fund, make sure you’re reinvesting because when those funds get hit the next dividend buys more shares and the capital gains distribution at the end of the year buys more shares as well.
Lastly, consider the Treasury market. We always suggest using the SPDR Bloomberg 1-3 Month T-Bill ETF (NYSEARCA: BIL). It’s an ETF that owns short Treasuries. The longest duration in there is around 90 days or maybe four months. It pays a dividend yield close to 4% and pays monthly. The NAV moves up and down when the dividend is paid, but it climbs back up afterward. If you ever need to sell it you can wait until before it goes ex-dividend and sell then. I own a pile of it.
Doug McIntyre: I own them.
Lee Jackson: I own it as well.
Doug McIntyre: Both of us own it.
Lee Jackson: And again we’re more mature investors, not from a cerebral standpoint but simply from an age standpoint, and it’s a good safe way to invest. You can get in and out every day.
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