Markets are trending up right now, thanks to a better-than-expected CPI and PPI print, which suggests that high interest rates are starting to make progress against inflation. In the short term, we might even see a large melt-up in the stock market, especially if we manage to reach and stay above 4,200 - a lot of money could come off the sidelines if that happens as FOMO sets in among institutional investors.
But I'd be really careful if I were you, because we're missing a big piece of the puzzle right now, and that is bank earnings.
I've been saying that as far as earnings go, we're already in a recession, because we're very likely to have two straight quarters of declining earnings per share (EPS) across the S&P 500. If the news from the banking sector is grim and we get another quarter of earnings decline across the board, it's going to send a clear message to investors: the market is overvalued.
Once that happens, you can kiss the rally goodbye. And of course, if banks decide to tighten credit availability, it's going to make any recession we experience that much worse.
So the smart move right now is to look for safe havens to park your cash while you wait for the worst. A lot of people turn to blue-chip stocks and consumer goods staples in times like these, but there's a danger there, because many of those companies are vulnerable to getting hammered if earnings season goes badly. A 5% dividend isn't going to do you much good if the stock itself depreciates 10-20% while you're holding it.
On my live show this week, I cover a lot of staple "safe haven" stocks that you all sent me, and give you a couple of my personal favorites right now. One of them is a real gift - a mining sector company that we just put a position on in one of my subscription services.
Just watch the video below to get the ticker...
I've got one more opportunity to tell you about before I let you go.
Infrastructure is another area where the government is already spending billions, and it's pretty much immune to recession concerns - those projects will go forward no matter how the economy's doing. I have a lead on a small company that could potentially solve America's electric grid problems. Shares are literally less than $5 right now, but they're preparing to close their doors to new investors this month.
It's absolutely critical that you see this before institutional investors step in. Click here for all the details...
The post How to Prepare for a Potential Recession appeared first on Total Wealth.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.