The pandemic has had many distinct features, one of which is the bounce-back effect. Investors who braved shockingly low valuations in early spring — for anything from retirement stocks to speculative fare — have since been rewarded for their boldness. However, the fact valuations continue to swing higher is now raising alarms about a possible asset bubble.
Of course, the prospect of an unsustainable rise is nothing new. Back in September 2020, Reuters reported that the Federal Reserve was “not going to break a sweat fretting about future asset bubbles.” The Fed stood ready to print its way out of trouble, which boded well for the capital valuations of retirement stocks. Further, in some circumstances, retirement stocks with higher-than-average dividends even fare well during inflationary periods. Still, stepping on the gas was never indefinitely feasible. After a year in the fast lane, the Fed is now concerned about the risks.
As such, it’s now possible that we’re on the verge of an asset bubble. Simply put, the intensity of this broader rally — not just in equities but also cryptocurrencies, housing, used cars, toilet paper, you name it — seems quite antithetical to the real fear on Main Street. If the economy was substantively on the mend, you’d expect money velocity to recover. It hasn’t, which suggests trouble ahead.
To be clear, I’m not saying a bubble is guaranteed to burst, nor that we’re definitely in one. However, investors should note the mounting evidence. And it’s not just U.S. analysts that are sounding the alarm. So, should the worst happen, make sure to snag some of these retirement picks on the discount:
- Dominion Energy (NYSE:D)
- National Storage Affiliates Trust (NYSE:NSA)
- Archer-Daniels-Midland (NYSE:ADM)
- Boeing (NYSE:BA)
- Booz Allen Hamilton (NYSE:BAH)
- Aflac (NYSE:AFL)
- IBM (NYSE:IBM)
Retirement Stocks to Buy: Dominion Energy (D)
While the utilities sector may be a bit of an obvious choice for retirement stocks, a lack of creativity doesn’t necessarily denote a poor idea. Indeed, when the strategy requires cash flow to enjoy your golden years, creativity runs the risk of turning into a liability.
If you want creative, go check out some blockchain-based initiatives and their associated cryptocurrencies. But if you want stability? Check out Dominion Energy and D stock.
Operating in 16 states and providing energy services to over 7 million customers, Dominion represents an indelible opportunity. With most everyone dependent on electricity — and digitalized technologies, for that matter — the company simply makes sense as a pick to bank on.
Even better, Dominion Energy is now focusing resources on relevant technologies such as battery storage. Considering how heavily interested the upcoming generation is on ESG (environmental, social, governance) investing, the company is making the necessary decisions to ensure that it thrives decades into the future.
National Storage Affiliates Trust (NSA)
Although society emphasizes the importance of millennials when making business and investment decisions, you don’t want to ignore baby boomers. For one thing, the World Health Organization (WHO) notes that people worldwide are living longer. That means this demographic will be sticking around for years to come.
Secondly, though, baby boomers are downsizing. Because many don’t need a big house anymore, they’re offloading unnecessary square footage to younger buyers, offering a key amelioration in the wild housing market
Still, their stuff has to go somewhere. And that’s where National Storage Affiliates Trust comes in as an enticing idea for retirement stocks.
Structured as a real estate investment trust (REIT), National Storage focuses on the ownership, operation and acquisition of high-quality self-storage facilities located within high-growth markets. This latter point is key. After all, real estate is all about location, location, location.
Combined with the years (if not decades) of downsizing ahead, NSA stock is a smart option should the asset bubble burst.
Retirement Stocks to Buy: Archer-Daniels-Midland (ADM)
Before we go any further, I would like to remind readers that my occupational security depends on a robust market. So, please don’t think that I’m the grim reaper of bull markets. If I’m wrong about an asset bubble burst, I’ll be celebrating alongside all you optimists, too.
At the same time, though, I wholeheartedly believe that the positive-thinking industry has turned somewhat toxic. Like it or not, you’ve got to be realistic about life and the markets. And that’s a great segue into our next pick: Archer-Daniels-Midland.
Normally counted among the boring retirement stocks (ADM is a food-processing and commodities-trading specialist), the impact of Covid-19 has forced everyone to reconsider their priorities. For instance, last year the supply chain disruption affecting food distribution across the U.S. made us all realize how precious sustenance is.
Therefore, if the bubble pops and you find ADM stock on discount, I recommend picking it up. It’s not like food is going out of style. And with the company’s investments in plant-based protein, this old dog is becoming more and more relevant, too.
Let’s be clear from the get-go for this next name: I don’t think you should buy Boeing shares right now. This pick was one of the worst-hit retirement stocks when the pandemic first hit the United States. Plus, Boeing was already courting controversy with the faulty software in its 737 Max plane.
As if these two pieces weren’t enough, though, this company has also had to make drastic changes. For instance, BA suspended its dividend. Moreover, back in April 2020, Financial Times suggested that it could take “years” for the payouts to return.
So, obviously BA stock isn’t off to a great start. That said, we should also consider the forward-looking nature of retirement stocks to buy.
The broader irony about Boeing is that its success was largely based on globalization — the same globalization that allowed Covid-19 to spread so quickly. But this too shall pass. While I’m not sure exactly when or how the pandemic will pan out, I’m pretty sure Boeing will still be around no matter what.
Retirement Stocks to Buy: Booz Allen Hamilton (BAH)
Next up on this list of retirement stocks is BAH stock. Of course, mitigating the damage of the pandemic has been a major focus around the world for nearly two years now. However, the global health crisis didn’t stop our other problems, in particular the digital threats that we face day to day.
For example, one of the biggest cyberattacks in recent memory happened just this past May: the Colonial Pipeline breach. As a precautionary measure, Colonial had to shut down its pipeline altogether to ascertain the damage. Specifically, the company was trying to determine if hackers had gained access to more sensitive data to exploit additional vulnerabilities.
Sure, the general public might now think the matter is resolved. However, cybersecurity experts are worried about a new threat looming over the horizon: killware. Whereas ransomware attacks seek to gain profit, killware is all about causing disruption and “literally end[ing] lives,” as USA Today puts it.
Of course, the U.S. can’t wait around to see what will happen next. That makes Booz Allen Hamilton an ideal play among retirement stocks. Thanks to the company’s vast array of digital solutions — including cybersecurity for enterprises, government agencies and critical infrastructures — BAH should be indefinitely relevant moving forward.
While not the most exciting category available, when it comes to retirement stocks, blue-chip insurance firms have plenty to like. Thanks to their vast resources and emphasis on risk mitigation, you’re not going to see too many wild movements. True, that’s not great if you’re seeking growth. But stability is really the name of the game here.
That said, the Covid-19 crisis might also give companies like Aflac a leg up in terms of prominence when compared to other retirement picks. As the World Economic Forum mentions, the pandemic forced businesses to rethink workplace safety protocols and standards. Moreover, the pandemic has likely also forced individuals to consider protecting what’s most important: family.
To that extent, Aflac’s supplemental insurance programs have essentially received a free organic marketing opportunity. Yes, your “regular” health insurance policy may cover most of your expenses for unforeseen incidents. But you may also be left paying hefty bills out of pocket. Given the random nature of Covid-19, the crisis has emphasized the value of covering your bases. That should definitely benefit AFL stock.
Retirement Stocks to Buy: IBM (IBM)
As a precautionary measure, I’m going to stick IBM last on this list of retirement stocks for an asset-bubble burst. While I like the long-term recovery story here, this equity unit took a beating on the Oct. 21 session, shedding nearly 10% of its market value.
The culprit? Big Blue’s third-quarter earnings report. The results disappointed Wall Street, which was looking for revenue of nearly $17.8 billion. Instead, the legacy tech firm posted sales of $17.6 billion. While that may be a small miss on the calculator, the issue was that IBM’s cloud and cognitive software division failed to drive the gains the market had expected.
Unfortunately, because IBM remains a high-profile organization, the miss shone a spotlight on the venerable Dow Jones index. A day prior, the benchmark had hit a record high, but IBM’s red session contributed to a slight softening for the Dow.
However, we’re ultimately talking about one session and one quarter. Over the long run, if you can grab IBM stock at a discount, it might be well worth it. This company’s pivot into relevant cloud and software solutions — along with other high-demand sectors like artificial intelligence (AI) and cybersecurity — offers significant reassurances.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.