The current bull market is more than nine years old, but stocks are starting to stagnate. The Dow is down over 1% on the year, including a drop of more than 1,000 points on Feb. 5. The market hasn't rallied back to January highs.
That could be a sign we'll see a bear market in 2018.
Now, a bear market is defined as a 20% drop from an index's previous high. That means we'd have to see the Dow sink to 21,293, more than 2,500 points from today's level.
The next bear market is possible, but we aren't predicting it will happen anytime soon.
Instead, we want Money Morning readers to be aware of some of the warning signs in the market right now, as well as how they can protect their assets.
Whether it's a coming bear market or a stock market crash, investors should always have a plan in place for the worst-case scenario, and we're here to help...
Why the Next Bear Market Could Be Coming
The stock market is unpredictable. The Dow dropped 700 points on March 22 and another 572 points on April 6 amid trade fears after U.S. President Donald Trump announced potential tariffs on China.
Today (April 24), the Dow plunged another 500 points after disappointing earnings reports.
We simply don't know what the next day or week will hold for the stock market. But there are some signs that a serious stock pullback could be coming.
You Must Act Now: America is headed for an economic disaster bigger than anything since the Great Depression. If you lost out when the markets crashed in 2008, then you are going to want to see this special presentation...
You see, the U.S. Federal Reserve is aggressively raising interest rates. The Fed has hiked rates six times since December 2015, and it could raise rates at least two more times in 2018 alone. Fed Chair Jerome Powell has even signaled that he thinks the economy is doing well enough to support higher interest rates.
That's important, because low interest rates have helped push stock prices to record valuation levels.
After the 2008 financial crisis, the Fed cut rates to their lowest levels ever: 0.25%. That meant borrowing money became as cheap as it could be in order to help boost the economy back to growth.
But public companies used part of the money to repurchase shares of their own stock. Public companies borrowed $2.1 trillion between 2009 and 2016 while buying back $1.9 trillion in their own shares.
And share prices soared...
The cyclically adjusted price earnings (CAPE) ratio, which measures total stock market valuation, is currently at 31.06, which is nearly double its historical average.
Of particular concern is the fact that this ratio has only been higher twice in history - before the infamous 1929 stock market crash and just before the 2000 tech bubble burst.
No one can provide an accurate forecast of stock market crashes, and the CAPE level doesn't mean that we are doomed. And we aren't predicting a 2018 bear market.
But now that the Fed is hiking rates just as stocks are near record-high valuation levels, investors everywhere can't afford to be complacent.
Fortunately, you can protect yourself without sacrificing profits. Here are two resilient stocks that have serious profit potential and a track record of climbing during bear markets...
Own These 2 Stocks Ahead of a Bear Market
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We're recommending two stocks that 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 to 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 $217.97 a share and pays a 1.59% dividend yield.
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 $229.53 and pays a 1.31% dividend yield.
And for investors looking for an even more aggressive protection strategy...
Your Financial Future Is at Stake (Are You Prepared?)
If you're like most Americans, you've felt a sense of market turmoil ahead. We could be in for another white-knuckle ride... a "Great Reckoning," if you will.
The vast majority of folks don't see this coming, and those few who do are not preparing properly... nor profitably.
So ask yourself, right now: Are you where you want to be financially?
If the answer is yes, that's great.
If the answer is no, then understand that you are not alone - and you need to click here now...