These Investments Are Dependable when the Yield Curve Inverts

Markets are going off the rails again.

After days of losing hundreds of points, the Dow Jones exploded on Tuesday after President Trump said he was delaying the 10% tariffs on some Chinese imports.  

Believing the bottom was in place, traders began to jump back into the market.  

But the party ended this morning with an inverted yield curve.

The 10-year Treasury bond yield slipped to 1.627%, which is now below the 1.632% yield on the 2-year.  That’s the first time that’s happened since 2007. Even the yield on the 30-year bond yield just fell to an all-time low of 2.02%, which is well below its previous record low of 2.0889%.  

Such a development in the 2/10 has occurred ahead of every U.S. recession over the last 50 years, sometimes leading by as much as 24 months, says Fox Business. “For example, October, November of 2006, exactly one year before the Great Recession began, the 2-10- inverted.”

While investors are nervous, it’s not time to flee the market.

We have to remember the market is resilient.  It’s seen much, much worse. We must also consider there are other ways to protect capital in this crazed market.

Top Ways to Protect your Portfolio

One, investors are pushing into volatility-based opportunities including the ProShares Ultra VIX Short-Term Futures ETF (UVXY), VelocityShares Daily 2x VIX Short-Term ETN (TVIX), and iPath S&P 500 VIX Short-Term Futures (VXX).

Two, investors are pushing into the safe havens of gold with stocks, such as Barrick Gold (GOLD) and Newmont Goldcorp (NEM), in addition to gold ETFs like the GLD.

Three, investors are also pushing into high-yielding REITs by way of closed-end funds.

In fact, one of the best investments you can make s in real estate investment trusts, or REITs.  That’s because they’re seen as having far less exposure to trade war conflict, and benefit from falling interest rates.  Plus, REITs, which pay out at least 90% of their taxable income in dividend payments to you, they yield 4% on average.

And four, after a yield inversion, investors push into utilities for safety, as demand for electricity and gas remain a steady need. In addition, stocks like these offer higher dividends and cash flow.  Duke Energy for example has a yield of 4.2%. Dominion Energy has a yield of 4.9%.

These are just some things to keep in mind, as the markets wobble here.