Stock Market Correction Looming, Warns Financial Industry Expert Mike Fassi

Ayaan DxBby:

Business

It’s been happening all year: the Dow Jones Industrial Average has repeatedly closed out the week at all-time highs. Other major stock averages around the globe—such as the S&P 500 and the German DAX—have also recorded highs. The figures seem to indicate a booming market and a healthy economy, but financial experts like Fassi Financial’s Mike Fassi are warning investor against being too cocky or confident. According to Fassi, all indicators point toward a looming market correction.

Fassi isn’t the only person warning against the likelihood of a correction. In late June, Forbes published an article titled “Be Prepared for a Global Stock Market Correction in the Second Half of 2017.” Other financially-minded publications have issued similar warnings. The message to investors seems to be unanimous: “Get ready.”

According to Mike Fassi, the market right now is saturated with overbought and overvalued stocks. That kind of stock market environment is almost always pierced by a correction. And Forbes is right: that correction is probably coming sometime in the next few months.

So, what can investors due to prepare themselves and shore up their portfolios before the correction hits? Fassi has a few strategies that he thinks anyone currently playing the stock market should consider.

His first tip is to put assets into short-term bonds.

“Bonds aren’t totally stable or totally insulated from changes in the stock market, but they can provide some protection,” Fassi said. “Short-term bonds are the way to go for investors looking to protect their assets. Long-term bonds are riskier because they can be devalued by shifting interest rates. Short-term bonds are less vulnerable to interest rates, so they are definitely the better place to put your money right now.”

For those who would rather keep most their assets in stocks, Mike Fassi has two recommendations: steer toward investments in stable dividend paying stocks and use non-correlated assets to diversify.

“Dividend paying stocks like utilities or publicly traded REITs are the best ‘defensive stocks,’ if that’s what people are looking for,” he said. “These kinds of stocks are pretty stable and low-risk and can give you a nice stream of income during the marketing correction period. Non-correlated assets are a great option right now because they have no ties to the stock or bond market. By putting 20 to 30% of your portfolio into non-correlated assets, you can make it so that you’re not really at the mercy of the stock market.”

Fassi’s final tip is for investors to increase their cash position. Often, he says, investors will only focus on assets—even in lean times. Adding some cash holdings into the mix can be a smart safeguard in case the correction hits the market even harder than most are expecting.

“If you are looking for value in the stock market right now, you probably aren’t going to find it,” Fassi said. “Stocks are so overvalued and overbought right now that most investors probably aren’t going to hit the jackpot by looking at assets—especially with a looming market correction. They’d be better off bumping their portfolios to include 10 or 20% cash holdings, just to make themselves a little less vulnerable. It’s way smarter to play it safe right now than it is to take risks.”

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