NEW YORK (ETF Expert) -- With S&P 500 stocks approaching all-time highs daily, it may be more instructive to look at potential hedges and "diversifiers."
1.iShares Silver Trust (SLV). Over the last year, SLV has served as a fine diversification vehicle due to its low correlation (0.38) with the S&P 500 SPDR Trust (SPY). And over the last six months, SLV has been an admirable hedge against a stock market decline (-0.50).
Ye,t there's one statistical relationship that may make silver a solid longer-term investment... its 10-year .92 correlation with the national debt. In other words, as long as the national debt increases, so should the price of silver.Many people believe that the U.S. will never be able to pay down the national debt, that we can only push back the day reckoning. They argue that electronic money printing and/or quantitative easing merely allows the U.S. government to borrow inexpensively until a catastrophic event (e.g., war, hyperinflation, European-style debt crisis, civil unrest, crash, default, etc.) restructures the entire economy. It's hard to argue that our national debt will go down over the next 10 years. It follows that -- end of days or no end of days -- correlation data demonstrate silver's precious nature in a rising debt environment. Equally compelling, SLV has remarkable support at a price point of $25. 2. iShares Global Consumer Staples (KXI). One of the issues that face the "reluctant bull" is the reality that the tried-and-true U.S. consumer staples sector is hardly cheap. There may be safety and income for those who own Procter & Gamble (PG), Pepsico (PEP) and Colgate Palmolive (CL) via SPDR Select Consumer Staples (XLP), but unforeseen dollar weakness or a shift to foreign equities could cause underperformance. One way to diversify some of that risk is to "go global." Adding Nestle, Unilever (UL) and British American Tobacco (BTI) to the mix involves hedging in non-dollars (roughly 50%) as well as benefiting from foreign mega-brands.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV