While the overall market is beaten down this year, there are still some outliers that typically hold up well in an economic downturn, especially discounted retail stores. Shares of Dollar General have returned 10 percent this year, drastically outperforming the S&P 500 which has lost 12 percent in 2018.
“They did very well during the last bear market for obvious reasons because people still buy from there and they ratchet down in their spending. It’s consistent spending,” said Tom Essaye, founder of Sevens Report Research.
“In bear markets, you want to go high quality and reliable revenue streams. Consumer staples is the one group that should continue to be able to grow their business regardless of what is happening,” he added.
Aside from holding cash, it might also be a good time to look at safe-havens gold and silver, which will likely benefit from a weakening dollar next year. The Federal Reserve’s interest-rate hikes had been supporting the greenback until the central bank’s somewhat dovish signal at its last meeting pared back its strength.
“That is an asset class that is going to benefit in this type of an environment, especially if the Fed is probably done hiking interest rates in this cycle. I wouldn’t buy them just for the sake of being safe haven. I would buy them because I expect dollar weakness next year. The strength in the dollar this year has really been the only thing that kept them from rallying further,” Boockvar said.
Gold rose to its highest in six months on Wednesday as worries over the government shutdown and President Donald Trump’s criticism of Fed Chairman Jerome Powell drove investors towards the safe-haven metal.
“Gold and gold stocks have done well recently, and they will probably continue to do so especially when we are in an era of a declining dollar. That will give gold and gold stocks a tailwind,” Essaye said.