The only thing certain in the stock market is uncertainty. The wholesale selling of stocks in May proved this point. After climbing more than 17% during the first four months of the year, the S&P 500 dropped nearly 6% in May alone.
Why were investors so nervous last month? As always, the worry is about the economy.
Many are worrying there will be a recession in the near future. I'm not sure how that could happen, given the "wind" is still at our backs.
Both monetary and fiscal policy is favorable to economic growth, with nothing changing in the near future.
If anything, the more likely path forward is more stimulus from a dovish Federal Reserve that's poised to cut interest rates. Of course, those are the same rates that were hiked last December.
What about the trade war with China? The impact of tariffs is most certainly negative.
GDP will be lower the longer tariffs are in place. However, how much lower is anyone's guess.
So what should investors do now?
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For starters, stop guessing and instead devise a game plan for all of this uncertainty.
If the Federal Reserve can change policy on a dime to the favorable, they can become hawkish just like that too.
Nobody knows the future, and that's why investors need to be defensive when it comes to managing their portfolios.
We are in uncharted territory with an economic expansion that is more than a decade old.
At the same time, we have an administration in Washington that is highly unpredictable, to put it mildly.
One wrong move and much of the market could go tumbling.
But not the whole market...
One area that is likely to be shielded from the uncertainty is the REIT space.
Stable cash flow and dividend payments will keep attracting buyers in droves.
That demand will likely provide a cushion for any potential sell-off that may occur from here.
If we can find a REIT that is undervalued for whatever particular reason, all the better.
Many REITs today pay outrageously high dividends at the moment, but investors have to be selective.
When buying a REIT for a large dividend in a low--interest rate environment, the key is to find stability in earnings.
That stability ensures the dividend will be paid at the same level every year no matter what the economy does.
To find a stable dividend-paying REIT, I let the Money Morning Stock VQScore™ do the work.
Here's one of the top REITs to buy in June...
This Is the Best REIT to Buy Now for Uncertain Markets
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The highest-rated REIT according to the VQScore right now is Whitestone REIT (NYSE: WSR).
Shares of Whitestone collapsed in late February on concerns that it may have to cut its dividend.
The stock lost 20% of its value in a few trading sessions on the news.
While shares have recovered some since March, Whitestone shares are still depressed.
As a shopping-center owner, the concerns are legitimate, but investors need to dig deeper.
So far, the demise of retail has been overrated from the standpoint of the commercial real estate investor like Whitestone.
Sure, retailers are closing stores in record fashion, but that empty space doesn't sit empty for long.
The ability to adapt has helped owners like Whitestone keep cash flow stable.
The announcement in late February was likely a cautious pivot by management.
In the face of rapidly deteriorating conditions for retailers such caution was warranted.
Still, analysts expect earnings at Whitestone to be flat from the current year to the next.
Perhaps that is why the stock has stabilized.
Or maybe, investors are chasing the now 9% dividend yield of this commercial real estate REIT.
Earnings are expected to come in at $0.23 per share this year and $0.25 per share in 2020.
That's plenty for Whitestone to maintain its dividend.
The real kicker for investors today is that the economy is doing well.
Sure, there appears to be some slowing in the United States, but the job market is red-hot, and that should help retailers avoid having to shut down more outlets.
Consumers are exceedingly optimistic, with consumer confidence near historical highs.
Wage growth in a tight labor market is coming.
If so, spending will follow, giving retailers a reprieve of sorts in the near term.
Fewer stores closing would be a big win for Whitestone.
From a macro perspective, buying Whitestone today will also be supported by falling interest rates in the United States.
Right now, there is a better than 50% chance of a Federal Reserve rate cut in July.
That cut will help spur economic growth domestically, further assisting retailers - and by extension, Whitestone.
As long as that dividend is safe (and it looks like it will be), Whitestone is the top REIT to buy now.
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