Stocks to Buy During War: Protecting Your Portfolio in 2022
As tensions continue in Ukraine, global financial markets also continue to be under pressure. That said, if you haven’t already, it’s time to start looking for stocks to buy during war to protect your account before it’s too late.
UPDATE: IU Einstein Bryan Bottarelli Weighs in on “The Only Defense Stock You Need”.
Check out the video now.
Even before the full-scale Russian invasion, the stock market was slipping with inflation racing across the economy. Yet things could worsen with Russia being a key supplier of oil and other commodities.
With many nations in Europe relying on Russia for more than 80% of their imports, oil prices have been rising lately. However, the EU is currently holding off on a Russian Crude Oil Ban, which has eased prices, at least for now.
History shows us war can affect the stock market in many ways, both positive and negative. The markets are pricing for war, but at what probability? And for how long will it go on? Depending on your time frame for investing, these questions are critical going forward.
Keep reading to learn more about the best stocks to buy during war that can help protect your portfolio from the worst.
Stocks to Buy During War: Defense vs. Defensive Stocks
As the name implies, defense stocks provide supplies for war such as weapons, tanks, fighter jets, and more. Not to be confused with defensive stocks, which provide stability when markets are in distress with generous dividends.
With this in mind, many ‘defense stocks’ are considered good defensive stocks with large cash flow and generous dividends.
- Lockheed Martin (NYSE: LMT): Starting with the world’s largest defense firm, Lockheed Martin supplies the U.S military and its allies with critical missiles and aircraft. Seeing that the company is a major supplier of fighter jets and missile defense systems, LMT stock is up nearly 28% YTD despite market turmoil.
- Boeing (NYSE: BA): Boeing is another top-five defense contractor and the second-largest aircraft maker. That said, the company supplies military aircraft, missile defense systems, and communications for defense. Although BA stock is down over 50% from its all-time high of $446 per share, Boeing is getting back on track. Moreover, with Boeing’s aircraft now under a microscope, the company cannot afford another slip up.
- Raytheon (NYSE: RTX): Another top defense stock, Raytheon supplies missiles and radar systems. But, a significant source of Raytheon’s revenue comes from its intelligent systems. These advanced sensors help detect enemy movement on the field and online (cyber).
These are a few of the biggest names in global defense. If supplies are needed for war, these companies lead the way with advanced supplies and technology.
Commodity & Energy Stocks
The biggest news across commodity markets right now is oil prices. Since Russia plays a major role in the world’s oil supply (especially in the E.U.), prices are skyrocketing. Oil futures in the U.S. ended at their highest in over two weeks.
As a result, crude oil companies like Exxon Mobile (NYSE: XOM) could see their margins impacted. At the same time, if the war disrupts the supply chain further, then it could do the opposite. On top of this, President Biden is pledging to cool the surging prices at the pump.
Prices of grains are also selling off today after soaring in February. Many headlines note the higher wheat and corn prices, but the uncertainty makes these particularly hard to trade during war. Another point to consider is fertilizer prices. Russia is the second-largest producer of Potash, a critical element in most fertilizers.
That said, the best setup I see right now in commodities is in gold. After being deemed a “pet rock” for the past several years, gold is holding its own during a time of crisis. As investors seek safe-haven assets, gold is up 10% this year, settling above $1,800/oz.
The SPDR Gold Trust ETF (NYSE: GLD) looks to be setting up for a run, sitting on the verge of all-time highs. In recent months, gold is proving to be more of a safe haven than cryptocurrencies, with Bitcoin still down 1% YTD.
Bonds
Although not technically stocks, bonds can be another great way to continue growing your portfolio during market swings.
Bonds are typically less risky than stocks, but they don’t offer the high growth potential of stocks. Though recently, the bond market is not acting as the safe haven it’s known to be.
For example, the iShares Core U.S Aggregate Bond ETF (NYSE: AGG) is down 6.3% so far in 2022. One reason for this is the Federal Reserve’s shift to raise interest rates this year. When interest rates go up, bonds become less attractive for investors, leading to less demand.
If you are looking to invest in bonds, you may want to consider a short-term one to protect your account during the turmoil. For instance, the Vanguard Short Term Bond ETF (NYSE: BSV) gives access to short-term, high-grade treasuries (one to five yrs.)
Cash
Even though you may not think it, cash is still a position. When in doubt, having a solid cash position can give you peace of mind during times of war.
More importantly, the U.S. dollar is strong right now. According to the U.S. Dollar Currency Index (DXY), the dollar has gained over 7% in the past year. The index weighs the value of the dollar compared to other currencies.
Although holding cash will not give you the explosive returns like growth stocks have in the past, it also won’t blow up your account.
Stocks to Buy During War: Final Thoughts
If you are looking for stocks to buy during war, you should know a few things. For one thing, now more than ever, it’s critical to start practicing risk management.
Diversification can be a great way to start. Rather than having all your eggs in one basket, like tech stocks or growth, it can help to own various sectors. As I have shown, gold is holding firm for the most part as investors look for less risk.
However, these stocks to buy during war do not offer complete protection. The U.S. stock market is notoriously resilient, but it doesn’t mean assets won’t fall further.
Nobody knows how long this could last and what will happen next. It’s best to prepare your portfolio for the worst. That said, history has shown us stocks to buy during war can include defense, commodities (gold) and energy. Furthermore, a strong cash position and exposure to bonds can offer further protection.