The article discusses the potential for a stock market crash in 2026, highlighting uncertainties like AI's limited returns and economic vulnerabilities, and suggests diversifying into defensive stocks like Rio Tinto as a precaution.
The stock market currently shows no signs of an impending recession, with investors favoring cyclical stocks and the S&P 500 Cyclical/Defensive Ratio reaching high levels, indicating confidence in continued economic growth despite some concerns from strategists.
CNBC's Jim Cramer recommends investing in defensive stocks like health care, discount stores, and natural gas as lawmakers remain in a stalemate about the debt ceiling. Cramer suggests Oneok, a natural gas pipeline company, and Chipotle as safe bets, along with clothing discounters Ross Stores and TJX. He also recommends pharmaceutical companies Biogen and Eli Lilly, with the latter having an edge due to its popular weight loss and diabetes medicine, Mounjaro. Cramer advises investors to learn from the 2011 debt ceiling crisis and focus on winners that stayed winners through the worst of the debt ceiling talks.
Investors are turning to defensive stocks, Japan, and Warren Buffett to beat the risk of a US recession and another Fed rate increase. Many believe that Berkshire Hathaway's shares have a significant price premium and will outperform the US market.