Food stocks help you sleep when market dives, as do municipals

The Ticker

July 08, 1998|By Julius Westheimer

CONSIDERING STOCK market volatility, are you puzzled where to put your money? Here are suggestions from generally reliable sources: SAFETY FIRST: Edward Yardeni, chief economist, Deutsche Bank Securities, warns, "Expect a 30 percent stock market correction by next year. That slide may have already begun -- and will likely accelerate. A good strategy: avoid investing in 'risk-prone' sectors -- particularly in emerging Asian markets. Focus instead on fixed-income securities and stocks in recession-resistant areas such as food, beverage, retailing and utility stocks. Also, shift to 25 percent stocks, 25 percent cash and 50 percent in government bonds by October."

NOT JUST FOR RICH: Many people overlook benefits of municipal bonds, but tax-frees might be just the thing to buy these days. "Yields on tax-free municipal bonds are 85 percent to 90 percent of pretax Treasury yields," says George Friedlander, fixed-income strategist at Salomon Smith Barney. "Historically, yields on municipals range from only 65 percent to 80 percent of Treasuries." He adds that with these narrow income spreads between Treasuries and tax-frees, municipals are excellent buys even for people in lower tax brackets.

IT'S NOT EASY: Laszlo Birinyi, asset manager, says in Bloomberg Personal Finance, July, "This market has been kind to individual investors, but most haven't been making as much as they should have. Last year the Standard & Poor's 500 stock index gained 32 percent, while the average U.S. growth fund returned 3.2 percent less. Anyone -- no matter how educated or handworking -- who wants to be successful by casually reading the Wall Street Journal and an occasional financial publication has as much chance as a guppy in a shark tank."

QUICKIES: "For bond investors, five-year Treasury notes are a good choice. Recently they yielded 97 percent of the yield of the much more volatile 30-year bond." (The Bond Outlook)

"Over half of Wall Street's economists believe the Fed's next move will be to eventually raise the Fed funds rate." (Paine Webber)

Pub Date: 7/08/98

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