Wall Street has had no shortage of gloomy headlines in recent weeks. And recently, JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon warned of an economic hurricane looming. In turn, he suggested investors should brace themselves even though things seem fine for the time being.
Similar dire remarks came from John Waldron, President and COO of Goldman Sachs (NYSE:GS), and Elon Musk, CEO of Tesla (NASDAQ:TSLA), in early June. Additionally, the World Bank recently underscored the threat of high inflation and low growth — the so-called stagflation. “The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank President David Malpass said.
Meanwhile, U.S. inflation hitting a 40-year high has sent the stock market into a tailspin. According to the Bureau of Labor Statistics (BIS), inflation soared 8.6% in May from 8.3% a month before. Also, the S&P 500 index has lost around 8.8% since the start of June, pushing the losses to almost 21% year-to-date (YTD).
Finally, on June 15, in its fight with inflation, the Federal Reserve (Fed) increased the interest rate by 75 basis points. It was the most aggressive move in four decades.
So now, investors are researching alternative investment paths to prepare for even darker clouds that loom on the horizon. Thus, let’s discuss seven profitable places to hide your money in an economic hurricane.
Shares of dividend-paying companies help insulate investment portfolios by paying out an income stream no matter what the stock market does. In addition, dividends can build considerable wealth over time, especially when reinvested for compounding.
Since 1926, dividends have contributed roughly 32% of the total return for the S&P 500. Meanwhile, capital appreciations have brought in about 68% of market returns.
Companies with regular dividend increases hold a special place in retail portfolios. They typically have a history of strong operations and cash flows. Their wide moats mean they can survive market turbulences such as high inflation, recessions or geopolitical concerns.
With that in mind, here are some picks of top dividend stocks and exchange-traded-funds (ETFs) if you believe dividend stocks are among the profitable places to put your money now:
- 3M (NYSE:MMM)
- Coca-Cola (NYSE:KO)
- Kimberly-Clark (NYSE:KMB)
- National Fuel Gas (NYSE:NFG)
- Procter & Gamble (NYSE:PG)
- ALPS International Sector Dividend Dogs ETF (NYSEARCA:IDOG)
- ProShares S&P MidCap 400 Dividend Aristocrats ETF (BATS:REGL)
The biopharmaceutical industry encompasses biotechnology and pharmaceutical businesses. It is one of the most dynamic sectors in the healthcare industry.
Since the early days of the pandemic, biopharma companies have been at the forefront of developing vaccines, therapeutics, and diagnostics. Boosted by successful technologies and solutions, the sector has grown significantly over the past few years.
Understandably, biopharma is not limited to fighting against the novel coronavirus. The increase in the older population and soaring prevalence of numerous chronic diseases put the industry in the limelight.
From cancer to genetic, neurological, and cardiovascular diseases, we see new areas of research and development (R&D). As a result, the global biopharma market is predicted to pass $750 billion by 2029, growing at a compound annual growth rate (CAGR) of 12.5% during the decade.
Therefore, interested investors can research the following biopharma individual stocks and ETFs further:
- Abbvie (NYSE:ABBV)
- AstraZeneca (NASDAQ:AZN)
- Merck (NYSE:MRK)
- Vertex Pharmaceuticals (NASDAQ:VRTX)
- Johnson & Johnson (NYSE:JNJ)
- Direxion mRNA ETF (NYSEARCA:MSGR)
- VanEck Biotech ETF (NASDAQ:BBH)
Next up on our list of profitable places is investing in precious metals. They are often used for portfolio diversification and as a potential hedge against inflation.
Gold and silver have long been recognized as stores of value. Historically, gold has exhibited a low correlation to the stock market performance and an inverse relation to the value of the U.S. dollar. In addition, copper, nickel, zinc, platinum and palladium also see increased demand, especially amidst market uncertainty.
Meanwhile, the transition to a green economy has created “greenflation,” or a surge in the price of different types of metals. They include copper, nickel, aluminum, and lithium, and are heavily used in the making of electric vehicles (EV), solar panels, as well as other renewable energy technologies.
Over the past 12 months, the price of lithium soared more than 400%, while the price of gold remained almost flat, and the price of silver fell more than 20%. In addition, the prices of platinum and palladium are also down year-over-year (YOY).
Although lithium is not a precious metal, the soaring demand could generate lucrative returns over time. And many analysts suggest investors allocate a small portion of their portfolios to precious metals.
Thus, if you are also looking at precious metals, the following names should be on your radar screen:
- Barrick Gold (NYSE:GOLD)
- Nucor (NYSE:NUE)
- Rio Tinto (NYSE:RIO)
- Wheaton Precious Metals (NYSE:WPM)
- iShares Gold Strategy ETF (BATS:IAUF)
- Invesco DB Precious Metals Fund (NYSEARCA:DBP)
- SPDR S&P Metals and Mining (NYSEARCA:XME)
Real Estate Investment Trusts (REITs)
Real estate has always been a favorite asset class among retail investors. REITs own and usually operate income-producing real estate, such as apartment complexes, industrial and healthcare facilities, hotels, malls or warehouses.
They typically generate better-than-average market returns during inflationary periods as rents and property values tend to rise when prices do. For example, equity REIT dividend yields averaged roughly 3% in recent months, around twice the yield of the S&P 500.
In addition, REITs pass on 90% of their taxable income to shareholders in the form of dividends. Such income streams could offer investors a safe port in an economic hurricane.
Readers searching for inflation protection in their portfolios can invest in REIT shares directly. Or they can explore ETFs that provide broad exposure to the sector. Examples include:
- Apartment Income REIT (NYSE:AIRC)
- Crown Castle International (NYSE:CCI)
- Vornado Realty Trust (NYSE:VNO)
- Extra Space Storage (NYSE:EXR)
- InfraCap REIT Preferred ETF (NYSEARCA:PFFR)
- Schwab US REIT ETF (NYSEARCA:SCHH)
Infrastructure is essential to our everyday lives and economic activity. From roads, airports, and railways to water, gas, electricity, oil and gas pipelines, telecom towers, or satellites, we rely on infrastructure assets daily.
Analysts note several tailwinds that may support long-term investing in infrastructure stocks. First, many infrastructure assets have an in-built inflation protection. Analysis reveals that “more than 70% of assets owned by listed infrastructure companies have effective means to pass-through the impacts of inflation to customers, to the benefit of shareholders.”
In addition, public infrastructure spending provides stimulus to a given industry. As a result, shares of infrastructure companies may be able to weather the current storm on Wall Street better than other asset classes. Finally, most infrastructure stocks are also known for their stable dividends.
Against this backdrop, investors could keep the following infrastructure stocks on their watch lists:
- Brookfield Infrastructure Partners (NYSE:BIP)
- Deere (NYSE:DE)
- Enbridge (NYSE:ENB)
- Parsons (NYSE:PSN)
- First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (NASDAQ:GRID)
- Global X U.S. Infrastructure Development ETF (BATS:PAVE)
- SPDR S&P Global Infrastructure ETF (NYSEARCA:GII)
Another profitable area to consider during heightened volatility on Wall Street is investing in sin stocks. Traditionally, the term has been used for stocks in alcohol, tobacco, gambling, cannabis, firearms, as well as adult entertainment industries.
Understandably, putting capital into vice businesses may not appeal to everyone. Therefore, sin stocks often trade at cheaper valuations, allowing their shareholders to take advantage of this “reputation risk.” Meanwhile, inelastic consumer demand for vice-products and relatively little competition help sin stocks remain recession-proof.
According to research by UBS (NYSE:UBS), the 50 largest sin stocks outperformed the MSCI World Index over the past 43 years by nearly 5% annually. Another study also highlights, “bad-news events have a lesser impact on sin stock return volatility than do good-news events.”
The following shares and funds could be of interest to investors who do not shun sin stocks:
- Altria Group (NYSE:MO)
- Constellation Brands (NYSE:STZ)
- Boyd Gaming (NYSE:BYD)
- Aurora Cannabis (NASDAQ:ACB)
- Sturm Ruger (NYSE:RGR)
- AdvisorShares Vice ETF (NYSEARCA:VICE)
- B.A.D. ETF (NYSEARCA:BAD)
Digital Assets And Cryptos
Our final profitable places to consider could appeal to readers watching digital assets, cryptos as well as non-fungible tokens (NFTs). Although they were the hype on Wall Street in 2021, these assets have come under significant pressure this year.
However, though still in the early stages, digital assets are gaining momentum mainly with the hopes of economic acceptance by governments and enterprises. According to a recent PwC report, around 38% of hedge funds surveyed are currently investing in digital assets, compared to 21% in the past year.
Similarly, cryptos are gradually becoming a legitimate alternative spendable currency, while broader adoption of Web 3.0 enables NFTs and the metaverse to gain popularity.
Consequently, allocating a small portion of the investment portfolios to a variety of digital assets and cryptos may enable investors to benefit from long-term structural growth in the broader crypto market.
In addition to Bitcoin and Ethereum, readers can consider researching the following digital assets and the ETFs giving exposure to the crypto space:
- Avalanche (AVAX-USD)
- Cardano (ADA-USD)
- Decentraland (MANA-USD)
- Solana (SOL-USD)
- The Sandbox (SAND-USD)
- Coinbase Global (NASDAQ:COIN)
- Grayscale Future of Finance ETF (NYSE:GFOF)
- Invesco Alerian Galaxy Crypto Economy ETF (NYSEARCA:SATO)
- Defiance Digital Revolution ETF (NYSEARCA:NFTZ)
On the date of publication, Tezcan Gecgil 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.