No one knows precisely when the next stock market crash will hit, which is why they can be so devastating. But buying shares of strong, resilient companies can help stabilize your portfolio if the worst happens...
A stock market crash in 2017 might not be on the minds of investors right now. The broad market averages are doing very well this year. The Dow is up 11.3% on the year and just hit its all-time high of 22,000. The S&P 500 is up 10.6% year to date (YTD), and the Nasdaq is up 18% in 2017. The Nasdaq and S&P just hit their record highs last week (July 26).
These gains are nothing new either. Since the recovery from the 2008 financial crisis began in March 2009, the Dow is up over 200%, its second-longest bull market ever.
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But no market goes up forever. While we can't predict the timing of a market crash or even a market correction, it's always a good idea to plan ahead.
That's why we want to show you some of the best stocks to own during a stock market crash. Even though stocks are up, there are some stock market crash warning signs...
The Latest Stock Market Crash Warning Signs
We aren't making a stock market crash prediction, and one is still unlikely, but there are some signs investors should be aware of...
First, a period of historically low interest rates helped boost stock prices. And the era of low interest rates is coming to an end.
In 2008, the U.S. Federal Reserve cut interest rates from over 5% in 2007 to 0.25% by the end of 2008. The federal funds rate had never dropped below 1% before, yet it would remain that low until just this year. After hiking rates three times in the last two years, interest rates are now at 1.25%, the first time they've gone over 1% since 2008.
The Fed kept rates this low to stimulate the economy. They reasoned that if borrowing was cheap with low interest rates, companies would be more willing to take on debt and expand, which would grow the economy.
Instead, publicly traded companies used the easy borrowing terms to repurchase shares of their own stock.
Public companies borrowed more than $1.9 trillion in the 2008-2016 period. At the same time, they repurchased $2.1 trillion of their own shares. These "share buyback programs" helped fuel the Dow's dramatic rise.
That leads us to our next warning sign...
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Second, stocks might be at record highs, but they could be overvalued.
While the Dow is up 212% since March 2009, corporate profits are only up 100% in the same amount of time. That's a sign stock prices are outpacing corporate growth.
And this is translating into stocks trading well above their values.
According to the Shiller price/earnings (P/E) ratio - a standard measure of valuation in the stock market - stocks are trading at historically high valuations. The current Shiller P/E ratio is 30.3, 82% above its historical average.
In comparison, the Shiller P/E ratio hit a high of 27.4 in 2007, just before the 2008 stock market crash began.
These warning signs show us that even though stocks are soaring, there's still good reason for investors to plan for the worst-case scenario, including a market crash.
Fortunately, we're here to help.
These are some of the best stocks to own during a stock market crash, and they can even help you turn a financial crisis into a profit opportunity...
The Best Stocks to Own During the Next Stock Market Crash
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One of the best strategies for a volatile market is owning resilient stocks that will hold their value and even grow during a market correction.
Money Morning Chief Investment Strategist Keith Fitz-Gerald thinks investors should hold on to stocks in the "Unstoppable Trends." The trick to making huge profits is to find "must-have" companies that fall into at least one of Fitz-Gerald's six Unstoppable Trends: medicine, technology, demographics, scarcity and allocation, energy, and war, terrorism and ugliness (known collectively as defense). The Unstoppable Trends are backed by trillions of dollars that Washington cannot derail, the Fed cannot meddle with, and Wall Street cannot hijack.
By owning well-run companies in these "Unstoppable Trends," you'll own resilient stocks that will charge out of any market downturn, leaving behind anyone who sold off stocks for other assets. And if the market doesn't crash, these stocks are still going up.
That's why we're bringing you three of our favorite stocks from the "Unstoppable Trends."
Raytheon Co. (NYSE: RTN) is our play for the trend of war, terrorism, and ugliness.
Raytheon is a leader in the defense industry with billions in contracts from the U.S. government and other countries across the world. That means even if the market falls, Raytheon is poised to excel over the long term.
Raytheon has billion-dollar contracts with the U.S. government, but it also has a diverse customer base. International customers make up just under half of its business. That means even if a few countries cut defense spending during an economic downturn, RTN still has plenty of other customers to help it weather the storm.
But RTN's real allure as an Unstoppable Trend pick is the fact that war is a reality of the world. For instance, as tensions rise abroad, the United States is more likely to need more weapons and equipment. When the United States used Raytheon missiles in a missile strike on a Syrian airbase on April 7, Raytheon's stock jumped more than 2%.
RTN currently trades at $173.6 a share and pays a 1.84% dividend yield. RTN is up 22% this year.
Becton, Dickinson and Co. (NYSE: BDX) is an example of a play in the Unstoppable Trend of demographics.
BDX is a healthcare company specializing in single-use medical products used in hospitals and long-term care facilities. That means as populations age, more people will need this type of medical care, and BDX will be in even more demand. People will need healthcare whether the market falls or not.
But BDX is also an exceptionally well-managed company. It has a 10.54% profit margin and maintains a 1.58% dividend yield, even after a $12.2 billion takeover of CareFusion two years ago. That means the company's capital management is sustainable and will easily survive a market downturn. And that's good news for its shareholders during a stock market crash.
BDX trades at $196.7 and pays a 1.4% dividend yield. BDX is up 19% YTD.
Microsoft Corp. (Nasdaq: MSFT) is a leading company in the Unstoppable Trend of technology.
The reality is that technology is here to stay; individuals and businesses across the world rely on it to function. Microsoft is a well-managed company and a leader in the tech industry. That means MSFT will bounce back after a downturn.
Microsoft is also constantly innovating to stay on top of the tech world. Businesses and individual consumers are increasingly relying on cloud storage to manage their daily lives. And Microsoft's new Azure cloud platform is poised to fend off its rivals by integrating Microsoft software, something CEO Satya Nadella calls "software as a service." So, even if the market dives, Microsoft services are still going to be in demand. Its Azure cloud computing service is now the second-largest cloud service in the world.
MSFT trades at $72.17 a share and pays a 2.2% dividend yield. MSFT is up 16% on the year.
The Bottom Line: Stocks might be breaking records right now, but that doesn't mean investors shouldn't be preparing for every scenario. In fact, there are some stock market crash warning signs. Investing in resilient stocks like MSFT, RTN, and BDX can help you protect your money during a market crash or correction.
Ten Triple-Digit Winners This Year... and Counting
Keith Fitz-Gerald's Money Map Report subscribers who have followed along with his recommendations are now sitting on 10 triple-digit winners this year - including a 201.68% return and 132.35% gain that closed out in the same week.
Each week, Keith shows everyday Americans how to tap into the world's biggest high-profit trends, ahead of the crowd.
There's nothing complicated or overly risky - and no guesswork involved.
Right now he's looking at another double-your-money opportunity, and there's still time to get in on it. Find out how to subscribe and access all of Keith's recommendations by clicking here now.