This correction will affect all major markets, and all sorts of assets and commodities.
In particular, it will also lead to:
- a deflation of the real estate bubble (in the U.S. and other countries).
- a fall of commodity prices (in particular, gold and oil).
- interest rates and bond yields will start to rise
- cryptocurrencies, including Bitcoin, of course will collapse completely (their's was not only a bubble, but one of the worst manias in history).
I had anticipated these movements both on this blog and on Twitter:
So if all assets and all major markets will suffer corrections and fall simultaneously, how can investors defend themselves?
I would say four things; which, in general, I have always said, since the founding of this blog in 2009:
- Buy low, sell high!
- Lower debt, increase savings!
- Invest for the LONG TERM!
In this environment, this means to not sell in a panic (buy low, not sell low, remember?).
And also to broaden your diversification strategies.
Here are some investments you might consider (to put small percentages in each, not all your eggs in one basket - diversify, remember?).
- Gold and other commodity ETFs (yes, I just said they will probably fall in the near to medium term, but they tend to hold up in the long term, especially in environments of higher inflation).
- Bonds (particularly inflation-protected securities like TIPS; also high-yield bonds).
- Consumer staples companies.
- "Giffen goods" or services, that is stocks in companies that do better when the economy is not doing so great (say, Walmart or fast-food restaurants).
- Real estate, particularly through REIT Exchange Traded Funds (ETFs).
- Broad Exchange Traded Funds (ETFs) in general are a good idea, as they enable diversification.
- International equity ETFs, especially in countries/areas that are still expected to grow (Asia, Latin America, Africa).
- High-dividend stock ETFs. Even though their price might fall, they will still pay high dividends.
- Invest in new and growing technologies. Say, for example, renewable energy and electric vehicles, instead of coal or oil.
- Always keep any funds you will need in the next 2-3 months in cash (and maintain a percentage of your assets in a money market or CD account; especially in times of a bear market, such as now).
And whatever you do, DO NOT speculate with Bitcoin or any crypto-currencies. These are worthless, you will lose your shirt.