Anxious investors should stick with buying stocks in the utilities and consumer staples sectors, which rose higher in the aftermath of the surprising outcome of the Brexit vote and avoided the massive volatility.
The immense pullback in stocks on Friday should be viewed as an opportunity to purchase stocks that are less volatile and will perform well despite unprecedented geopolitical events.
"Average retail investors, especially people looking to get into the markets, should see event driven catalysts such as Brexit for the opportunities they create," said Jason Spatafora, co-founder of Marijuanastocks.com and a Miami-based cannabis trader and investor known as @WolfofWeedST on Twitter. "As Warren Buffet says, 'When there's blood in the streets buy,' because panic creates a buying opportunity before sectors and companies naturally correct themselves. These investors can now buy the Facebooks and Apples of the world at a discount."
Mining, biotech, consumer staples and the cannabis markets are insulated and "even benefit from these fluctuations," because gold, silver and other precious metals are seen as hedges, he said.
The demand for pharmaceuticals boosts the biotech sector, and because the speculation surrounding their stocks is based on science such as positive trial results and not market conditions and ETFs like Credit Suisse AG - VelocityShares Daily 2x VIX Short Term ETN (TVIX), which are the inverse of the markets, Spatafora said.
The public cannabis markets tend to be recession proof and insulated because of the expansion occurring in this emerging market. The legal marijuana markets generated $5.7 billion in revenue in 2015, an increase from $4.6 billion in 2014 in revenue and are estimated to reach $22 billion by 2020, according to The ArcView Group, a San Francisco cannabis investment and research firm. More states are set to legalize adult or recreational use this fall. Four states have approved the use of them recreationally and 25 states passed the use of them for medical purposes. Currently, 86% of Americans live in a state that allows some level of legal marijuana use.
GW Pharmaceuticals (GWPH) , a U.K.-based biotech company with a cannabis-based epilepsy drug, is "easily the most heavily traded public company in the sector, and there is lots of support at this level month over month," he said. And of course, investors who are licking their wounds after a market downswing may need some vice-oriented products, like medicinal marijuana, to soften the blow and reduce the pain. "There's always companies in the alcohol sector, because people will always need a stiff drink after losing one third their holdings due to stupid moves like Brexit, or what I am now calling #Regrexit," he said.
Of course, there's no need for widespread panic. The market will rally in the coming weeks despite the shocking selloffs from Brexit since the yield on S&P 500 dividend stocks exceeds Treasury yields, said Patrick Morris, CEO of New York-based HAGIN Investment Management.
"On Friday, certain stocks posted positive returns even in a horrendous market and Altria (MO) was a standout," he said. "Investors apparently viewed the 3.25% U.S. dollar denominated dividend and defensive nature of the stock quite positively."
Energy, banks and other financial companies will rally, and they should "recover half or more of their losses," Morris said. "The banks are likely to rally as the realization that the world didn't end on Friday percolates through the market. Too much defense with no offense is a loser's game in the market. The next challenge is the actual negotiation. That will create a second leg down but anticipate a strong rally in between."
Depending on how the market reacts after the initial volatility, investors should buy defensive stocks such as utilities, which posted gains on Friday and gold miners, especially if the market continues to plunge, said Matthew Tuttle, the portfolio manager of Tuttle Tactical Management U.S. Core ETF (TUTT) .
"In times of turmoil, gold becomes almost a default currency," he said. "Right now, nobody wants the pound, and the euro is uncertain -- so investors are flocking to gold. Most of the time when the price of gold goes up, it helps gold miner stocks."
When the market rallies and comes back, investors need additional beta and should purchase stocks in the home building, financial and energy sectors, Tuttle said.
The decline of interest rates means investors will seek dividend-yielding stocks, said Robert Johnson, president of The American College of Financial Services in Bryn Mawr, Pa.
"Utilities and consumer staples are sectors that should benefit from Brexit although valuations in those sectors are fairly aggressive," he said. "Investors were seeking a safe haven on Friday, so the big winners were utilities, food and gold mining stocks. In a flight to quality, investors look for safer industries.
Other safe havens include the telecom and REIT sectors, said Jon Ulin, a managing principal of Ulin & Co. Wealth Management in Boca Raton, Fla.
"The perception of big market moves can be substantially greater than the actual results," he said. "Remember that your investment time frame may be the next five to ten years, not the next five to ten months."