This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Play It Safe With These Defensive Picks

NEW YORK ( TheStreet) -- Just like government shutdowns, bubbles are not a new phenomenon. Nor do bubbles inflate without letting some "air" out from time to time.

The last U.S. government shutdown was from November 1995 through January 1996. President Bill Clinton and the Congressional majority couldn't agree on a resolution until a compromise prevailed.

The S&P 500 fell almost 4%. It was no fun but it didn't burst the market's bubble. A month after the situation was resolved the S&P was up almost 11%.

That transpired when that bull market was nearly seven years old and it had plenty of running room after the crisis was over. At the moment we're four and a half years into this bull market, and wait till you see how high this one goes.

At the moment there's plenty of fear and trepidation. On Monday what some people call "the fear index" (a.k.a. The VIX) ended up for the day by almost 16%, closing at the high of 19.41. The VIX doesn't have far to go till it reaches the 52-week high of 22.72 reached on Dec. 31, 2012.

So if you're a little perturbed by the headlines and the ruckus over government gridlock and the looming draconian debt-ceiling dilemma, you're not alone. But the Federal Reserve has our backs, so see this well-needed market correction as a chance to "stock up" on defensive, dividend-paying companies.

Before making a couple of suggestions, let's look at what happened to the broader S&P 500 stock index after the VIX topped out at the end of 2012. Here's a one-year picture that paints a thousand words using the SPDR S&P 500 ETF (SPY). SPY Chart SPY data by YCharts

All the factors that caused these amazing first two legs of this bull market are still in place. The final two legs are most likely to surprise to the upside in big ways.

Bargain Stocks and Bargain Sectors

If a stock or a sector is a classic bargain after the Fed's extraordinary monetary policies and bond-buying spree, something is probably wrong.

Take the precious metal subsector of the broader materials sector. After a large correction in the price of precious metals, the miners have been hit hard and are still selling near 52-week lows.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
DHR $83.30 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs