The Next Stock Market Crash Could Happen in 2018

The next stock market crash could arrive sooner than you might think...

Since hitting its 2017 high on Nov. 8, the Dow Jones has steadily fallen, declining over 1%.

Next stock market crashAnd as the eight-year-long bull market lumbers on, we're seeing more and more stock market crash warning signs.

Now, that doesn't mean we expect an imminent stock market crash. In fact, the market could run even higher. But even though we aren't making a stock market crash prediction, we do want our readers to be fully prepared.

Being prepared includes knowing the warning signs the media are glossing over and knowing how to protect your money if there is a market crash in 2018...

2 Stock Market Crash Warning Signs for 2018

First, the U.S. Federal Reserve is committed to hiking interest rates, and the tighter monetary policy could have a dramatic impact on the markets.

The period of historically low interest rates since 2008 have helped fuel the stock market's dramatic rise. By raising rates - and pulling liquidity out of the market - stocks could see a drop.

Urgent: Feds use obscure loophole to threaten retirees. If you have a 401(k), IRA, or any type of retirement account, this could cause you to miss out on $68,870 or more. Learn more...

When the Great Recession hit in 2008, the Fed took drastic measures to boost the economy. It slashed interest rates from over 5% to just 0.25%, its lowest rate ever. The low interest rates made borrowing money as cheap as ever in the hopes of encouraging businesses to borrow and expand, even though the economy was stagnant.

On top of that, the Fed injected even more money into the economy through its quantitative easing program, ballooning its balance sheet to a staggering $4.5 trillion.

Now, the Fed is reversing course on both measures.

The Fed has hiked rates four times since 2015, and interest rates are now above 1% for the first time since 2008. Plus, the Fed is expected to hike rates another four times by the end of 2018 - pushing rates above 2% - and unwind its $4.5 trillion balance sheet.

That will pull money out of the stock market, just as the Dow is beginning to fall from record highs.

Second, the Fed spending spree helped push stocks to some of their highest valuations ever.

Between 2009 and 2016, when the Fed had rates under 1%, public companies borrowed $1.9 trillion. And that borrowing spree helped finance $2.1 trillion of share buybacks by these publicly traded companies. In other words, they took cheap loans to buy shares of their own stock, boosting their stock prices.

That sent the stock market valuations to historically high levels.

According to the Cyclically Adjusted Price Earnings (CAPE) ratio, one of the best measures of stock valuation, stocks are currently valued at more than 86.9% of their historical average. And with a ratio of 31.4, the stock market has only ever been valued more highly twice: in 1929 and 1999. The stock market crashed both times.

That doesn't mean a market crash in 2018 is a certainty, but it means investors can't afford to be complacent just because stocks have soared this year.

So we also want to show our readers how they can protect their wealth in the face of a market correction, or even a crash.

These are two of the best stocks to own when the market drops...

The Best Way to Prepare for the Next Stock Market Crash

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The two stocks we're recommending have a track record of performing even as the broader market declines. Both of these stocks brought positive returns during the tech crash in 2000, even as the overall markets fell more than 10%.

While there's no guarantee these stocks will be immune from the next correction or pullback, they are some of the best companies in the most in-demand industries.

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 these six "Unstoppable Trends": medicine, technology, demographics, scarcity and 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.

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 correct, these stocks are still going up.

That's why we're bringing you two 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 with the U.S. government and other countries across the world. That means if the market falls, Raytheon is going to continue 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 launched a missile strike on a Syrian airbase on April 7, Raytheon's stock jumped more than 2%, since its missiles were used.

RTN currently trades at $184.21 a share and pays a 1.73% dividend yield. RTN is up 29.7% 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 one-time use medical products utilized 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 higher 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 $220.42 and pays a 1.3% dividend yield. BDX is up 33.13% year to date.

Editor's Note: "Must-have" companies backed by Unstoppable Trends are a cornerstone of Keith's wealth-building strategy. But there's another type of investment he wants Money Morning Members to know about. It's one of his favorites, a kind of "desert island fund" he'd buy if he had to park his money in one place, "retire" from civilization for 20 years, and come back to a pile of money. Click here to learn more...

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