Gluskin Sheff analyst David Rosenberg offers several ways investors can protect their portfolios, when commodity prices are falling and the dollar is dropping.
The first is to focus on safe yield, wherever that’s available.
High-quality corporate bonds in non-cyclical companies with high cash reserves and minimal refinancing needs are good.
For equities, focus on reliable dividend growth and yield and buy preferred shares whenever possible.
Regardless of whether you’re buying credit or equities, buy companies with low debt-to-equity ratios and high liquid asset ratios because balance sheet quality is even more important than usual.
Become ultra-selective when it comes to shares in financial or retailing companies, and avoid highly leveraged companies.
Focus on sectors or companies with these micro characteristics: low fixed costs, high variable cost, high barriers to entry and a relatively high level of demand inelasticity, which means utilities, staples and health care.
U.S. stocks mostly fell last week, as health care giant Pfizer's disappointing outlook and President Barack Obama's commitment to bank and healthcare reform weighed on the financial and health sectors.
"Political factors are definitely putting a cloud over the market again, and (this) is probably going to put a lid on a rally for awhile until we get some clarity on these reforms," Scott Marcouiller, senior equity market strategist at Wells Fargo in St. Louis, told Reuters.
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