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Batten Down Your Stock Market Portfolio to Weather Storms on the Horizon

20 October 2006 - Features - Editor

No stock market is immune from the geo politics of July 2006. The Middle East strife enters a new phase with the involvement of Lebanon. The implications for oil and energy are obvious to most stock market investors, but there are many other threats and opportunities as well. Uncertainty about global trade and the absence of any binding regulation on exchange rates combine to make the U.S. stock market scene as cause for special concern.

Counterparts in emerging markets such as China and India have growth and cost advantages that call for strategic shifts in U.S. investment portfolios. We need have no doubt that the big boys such as large funds and financial institutions must have done their homework, but what about the small retail investor segment of the U.S. stock market sector? Here are 5 hot tips to keep your portfolio secure in the trying times ahead.

  • Look at Latin America: the continent has enormous natural resources, large domestic markets in some countries, and is completely free at this time of the Islamic elements of disorder which threaten most of the developed world. U.S. companies with strong presence in the continent have a head start over others who have chosen to stay away from this lucrative zone of the world.
  • Search for assets of natural resources: realty, mining rights and access to all raw forms of energy will remain in long term demand, regardless of sentimental reactions on every stock market to sudden political developments. Companies with sound assets of this kind are top investments in uncertain times.
  • Follow consumer behavior: spending on essential products and services will remain the same at least in trying times; the luxuries and discretionary spending take hits during spells of high inflation and war-like conditions in some parts of the world. Investors should adjust their portfolios in favor of companies in essential lines of business at the cost of others which sustain high margins during the good times.
  • Construction is a safe bet: much of Iraq remains in disrepair, and we see daily destruction of material assets in all countries affected by conflict. New construction is a certainty and companies associated with such activity, especially with new technologies related to energy saving, materials and project management, will have top prospects as peace and security finally prevail.
  • Emergency and risk management: people change their priorities after natural disasters and reports of losses on account of confrontation between countries. Insurance and security services of all kinds climb smartly in value during uncertain times, and are therefore good stock market buys if they are well managed.

This list is exemplary rather than comprehensive. The point is that there are many linings of silver in the grey skies under which we live in conventional times of the world. The trick is to shift gears out of the stable past and to adapt to the fluid situation which lies ahead. Investors can find many worthwhile opportunities in the murky waters through which we pass.

 


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