3 Ways to Beat a Recession for Profit
Global growth expectations are waning.
Negative yields litter the international bond market as central banks cut benchmark rates all over the globe.
U.S. stocks are falling off a cliff over the past few days.
Things are getting ugly… So ugly that Tom di Galoma of Seaport Global Holdings told Bloomberg, “In our view, a U.S. recession is an 80% probability.”
So is there any way to protect your wealth today?
There sure is. In fact, there are three great ways to keep your money safe and growing come the next recession.
Throughout 2019 I have tried to pound home a very important message.
Buy physical gold. Gold is racing higher as we speak and is a perfect store of wealth when the world appears to be on fire.
Year to date, gold has gained 15.6%, but there’s still a lot of upside for the yellow metal.
Projections range on Wall Street anywhere from $1,700–2,000 per ounce by the end of year. I’m just as bullish on the yellow metal and think $2,000 is very reachable this year. Here’s why:
- No relief in sight regarding the trade war
- Volatility is peaking in U.S. stocks
- Gold has been extremely undervalued for years.
We covered the reasons why these bullets will fuel much bigger gold gains. You can find those alerts here.
But your time is valuable, so let’s get to the next great recessionary hedge.
Silver Has More Upside Potential Than Gold
Silver is a good hedge against recessions for the same reasons outlined above for gold.
There is one big difference, however.
Gold has gained about 20% from last year’s low. And by my calculations, we could see 40% more in gains from here.
Silver, however, has even bigger upside potential. Silver is viewed as a leveraged bet on gold prices. And when precious metals markets start to rally, silver typically plays catch-up to, and then ultimately surpasses, gold.
Notice how silver prices often lag gold at the beginning of big precious metal rallies, as they did in 2004–05 and in 2009–10.
But also pay close attention to how about a year into the rally (green circles), silver catches up to and surpasses the percentage gain in gold.
In 2011 for example, silver outperformed gold by a whopping 350%. I see the same thing happening again soon as the precious metal rally that began last October gains more steam.
But gold and silver aren’t the only ways to beat a recession.
Don’t Forget About High-Quality, Low-Risk Profits
High-quality, low-risk stocks are a great way to protect your money and even profit during a recession.
If you want to ease the pain a recession can cause, I highly suggest you load up on conservative, low-risk dividend stocks. Here’s why:
- Dividend-paying stocks are historically much less volatile than the overall stock market.
- Dividends are still taxed but usually at a much lower rate than bonds and CDs. The rate at which dividends are taxed depends on the income of the recipient, but are capped at 20%. Bonds and CDs are not capped, and if you’re in the 35% tax bracket, that’s the tax you pay on bond and CD interest.
- Stocks and bonds pay the same. The dividend yield of blue chip stocks in the S&P 500 is 1.9%; that’s about the same as the yield on the 10-year Treasury bond, at 2%. But dividends offer a big advantage over bond yields: They grow over time.
- Over the past 10 years, S&P 500 dividends have grown an average of 9% a year! That means a 2% dividend yield should double to 4% per year in about eight years and then double again to 8% about 16 years from now and so on! Meanwhile, a Treasury bond with a 2% yield purchased today will still only offer you just 2% 10 years from now.
There you have it, folks.
If the experts are right and we have an 80% chance of seeing a recession soon, these three asset classes — gold, silver and dividend stocks — will keep your money safe and growing for months and years to come.
Here’s to growing your wealth,
Chief Income Expert