Wall Street: Reduce stocks and bonds and increase cash to 20%

◆ Seohak Ant Investment Guide ◆

As fears of a global economic crisis originating in the United States spread, the voices of Wall Street to reduce the proportion of stocks and increase the proportion of cash are growing. In the case of growth-led stock investment and technology stocks, the investment strategy of switching to defensive stocks with high dividend yields is expected to be effective from now on.

On the 4th, UBS, a global investment bank, argued that the investment strategy of 60% stocks and 40% bonds, formalized after the recent COVID-19 pandemic, should be reviewed.

A UBS official said, “Currently, an investment strategy needs to be established to prepare for volatility by increasing the proportion of cash to 20%. The New York stock market, which had rebounded on hopes that inflation concerns would fade away, faltered on Wall Street as US Federal Reserve Chairman Jerome Powell’s tough comments about interest rate hikes and the subsequent massive move (an increase of 0.75 percentage point) for the third time in a row, the general theory is that we should manage the crisis rather than aim for the opportunity. In particular, in a market with great uncertainty like now, it seems important to be in a position to cope with crises by ensuring liquidity as the investment adage of ‘cash is also stock’.

The recent rise in stock prices, led by technology and growth stocks, and the IPO market have also faced an ice age.

Although many investors consider investing in tech stocks that have been cut in half, the local atmosphere in the US is that it is better to diversify risk by investing in defense stocks rather than growth stocks. This means that the energy, commodities, and health care sectors, which are classified as defense sectors, need to be covered with boulders. As it is difficult to expect share price returns, a typical approach is to choose a defensive stock with a good dividend yield or invest entirely in a defensive stock exchange traded fund (ETF).

US Smart Investing and Stockmarket.com selected McKesson (MCK), the largest pharmaceutical wholesaler in the United States, as a defensive stock to watch. McKesson is the No. 1 company with a 25% share of pharmaceuticals distributed across the United States.

Based on the closing price on the 3rd, the S&P 500 and Nasdaq fell 23.3% and 31.7%, respectively, this year, while McKesson rose a staggering 39.76%, showing remarkable results. McKesson is also attractive as a dividend stock with a dividend of 54 cents per quarter. Atmos Energy (ATO), a natural gas-related stock at the heart of the European energy crisis, is also drawing Wall Street’s attention. As the number one natural gas distributor in the United States, it has 3 million natural gas distribution networks and has a dividend yield of 2.4% with a quarterly dividend of 68 cents.

If investing in certain stocks is a burden, you may want to consider investing in defensive stocks through ETFs. Spider’s Healthcare Select Sector ETF (XLV) is an ETF that includes major healthcare stocks, and the return is evaluated to have been -1.43% over the past year. The Utilities Select Sector ETF (XLU), a utility-related stock investment ETF, outperformed the Nasdaq with a one-year return of 4.12%, which recorded -24.13%. Colin Bristow, analyst at UBS, said, “As economic uncertainty grows, investing in defensive large-cap and market-leading stocks will be an opportunity.

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