Wall Street analysts say this indicator tells when the next stock market crash is coming...
Marko Kolanovic, a quantitative analyst at JPMorgan, told CNBC on July 27 that low volatility could be a sign of a coming downturn in stocks. Wall Street's fear gauge, the VIX, was at 10.11 on July 27, more than 20% below its historical average.
Because low volatility is unlikely to last forever, it could mean a market correction, or even a market crash, is coming next.
While we aren't making a stock market crash prediction, investors are always wise to prepare for the worst. And there are some other market crash warning signs to pay attention to...
Why It's Always Smart to Be Prepared for a Stock Market Crash
We don't think the market is about to crash, but the stock market's performance this year could be lulling investors into complacency. It's always a good idea to prepare for the worst, just in case.
The Dow is up over 10% on the year and has hit all-time highs of 21,000 in March and 22,000 in August. Its jump between 20,000 and 21,000 was its fastest 1,000-point gain in history.
While these gains have been excellent for investors so far this year, not all of the stock market's data is positive.
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First, low interest rates since 2008 have helped push stock prices to these record highs. That means stocks aren't soaring thanks to strong economic growth and expanding businesses, but because borrowing money has been cheap since 2008.
After the Great Recession began in 2008, the U.S. Federal Reserve slashed interest rates to 0.25%, its lowest rate ever. Before the financial crisis, the Fed had interest rates pegged above 5%.
The Fed's interest rate cut was meant to help the economy grow. Its logic was that it would be easier for businesses to borrow money and stay solvent, or even to expand, which would push the economy out of the recession.
But businesses used the cheap money to repurchase shares of their own stock.
Between 2009 and 2016, public companies borrowed $1.9 trillion thanks to the Fed's historically low interest rates. At the same time, they bought back over $2 trillion in shares of their own stock.
Those share buybacks have helped push stock prices higher. But now the Fed is committed to raising interest rates again, making borrowing more costly. The Fed has already hiked rates twice in 2017 and three times in just two years. One more hike is expected this year, too. That could push interest rates to 1.5%.
If cheap money helped boost stocks before, it's not going to work anymore.
Second, share buybacks may have helped push stocks to overinflated highs.
In fact, according to the Shiller P/E (price/earnings) ratio, stocks are at historically high levels. The current Shiller P/E ratio is 30.16, 79% higher than its overall average. And that's even higher than it was before the 2008 stock market crash, when it soured to 27.4 in 2007.
While this doesn't mean a stock market crash is coming, it could mean the Dow's record-breaking run this year might not last.
Fortunately, prepared investors can protect their money from a market correction or even a crash. Investors don't even need to leave the stock market for other assets when they own these two resilient stocks with high growth potential...
The 2 Best Stocks to Own When a Stock Market Crash Is Coming
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The two stocks we recommend have not only beat the market during downturns, but are projected to grow by double digits this year.
Money Morning Chief Investment Strategist Keith Fitz-Gerald recommends Raytheon Co. (NYSE: RTN) and Becton, Dickinson and Co. (NYSE: BDX), because these companies are well-run leaders in the "Unstoppable Trends."
The trick to making huge profits is to find "must-have" companies that fall into what Keith Fitz-Gerald calls the six "Unstoppable Trends": medicine, technology, demographics, scarcity/allocation, energy, and war, terrorism, and ugliness (also known 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.
Not only are these stocks resilient during downturns because they are in demand, but they are both sporting double-digit price targets over the next year...
Raytheon Co. (NYSE: RTN) is a leader in the Unstoppable Trend of war, terrorism, and ugliness.
As one of the top five largest defense contractors, Raytheon has billions in contracts with the U.S. government and governments worldwide. International customers make up half of Raytheon's portfolio. And because defense is a global necessity whether the stock market is up or down, Raytheon will always be in demand.
For example, as tensions rise abroad, the United States is more likely to need more weapons and equipment. When the United States launched a missile strike on a Syrian airbase on April 7, Raytheon's stock jumped more than 2%, since its missiles were used. And RTN is up 4% this week as tensions between North Korea and the United States escalate, even as the threat of conflict has pushed the Dow down 1% in the same time.
RTN currently trades at $181.70 a share and pays a 1.77% dividend yield. RTN is up 28.03% this year, and Wall Street analysts are giving it one-year price targets as high as $212. That could bring owners a 13% gain.
Becton, Dickinson and Co. (NYSE: BDX) is our best play for the Unstoppable Trend of demographics.
BDX is a healthcare company specializing in single-usage medical products utilized in hospitals and long-term care facilities. But what makes this an Unstoppable Trend is an aging demographic in the United States. As the population gets older, more people will need medical care, especially long-term care. And because people need healthcare no matter what the stock market is doing, BDX's demand will continue to grow.
BDX is also an exceptionally well-managed company too, which means it's turning that demand into profits for its investors.
Becton Dickinson has a 10.54% profit margin, 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. But most importantly, BDX transfers those profits to shareholders through its 1.5% dividend yield and growing share price.
BDX trades at $198.48 and is up 19.89% on the year. Wall Street analysts set one-year price targets for BDX as high as $230, a 16% jump.
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 right now.
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