Tags: cliff | stocks | bonds | choices

Investment Choices for Fiscal Cliff: Dividend Stocks, Emerging-Market Bonds

Monday, 12 Nov 2012 01:31 PM

By Dan Weil

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Many investors are wondering how to cope with all the uncertainty surrounding the Dec. 31 fiscal cliff.

Some experts recommend investing in dividend stocks and emerging-market bonds as ways to prepare for the cliff, The Wall Street Journal reports.

Governmental wrangling over the fiscal cliff could spark plenty of market volatility, as shown by the 3.6-percent plunge of the Standard & Poor’s 500 in the two days after the election last week.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

Cautious investors would do well to go for blue-chip dividend stocks, such as AT&T (T) and Walt Disney (DIS), Craig Johnson, technical market strategist at Piper Jaffray, tells The Journal. He likes them for their stable profits and rock-solid balance sheets.

When it comes to bonds, many market participants feel Treasury yields are headed even lower, whatever happens with the fiscal cliff.

Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management, recommends emerging-market bonds denominated in dollars, according to The Journal.

Those bonds carry higher yields than Treasurys do, and many emerging-market economies are thriving. Buying dollar-denominated bonds eliminates currency risk.

Experts recommend mutual funds and exchange-traded funds for investing in emerging markets to avoid huge fees and illiquid markets.

So many yield-seeking investors have dived into the government bonds of emerging markets that a lot of money managers consider those bonds fully priced. So they are shifting to emerging market corporate bonds instead, Barron’s reports.

To the extent that they’re sticking with government bonds, money managers are picking out frontier markets, such as Ghana and Uruguay, according to the magazine.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

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