As if investors haven’t had enough to think about these last few years, now there’s a debt ceiling crisis to consider. But a little perspective can go a long way.
First, this isn’t the first time the United States has butted up against its debt ceiling. And despite the posturing on both sides, there is no appetite for having the country default on its obligations.
That doesn’t mean that the debt ceiling crisis will get resolved before the 11th hour. In fact, history suggests there’s more drama to come. But history also suggests that there are some sectors that have performed better than others in past debt ceiling crises.
The takeaway is that the debt ceiling impact on the stock market is unknown. Therefore, it’s time for investors to hope for the best and prepare for the worst. This means doing more of what many investors are already doing.
In other words, finding stocks that historically perform well regardless of what is happening in the economy. With that in mind, here are three stocks for you to consider as the debt ceiling deadline approaches.
|SPDR Gold Shares ETF
NextEra Energy (NEE)
It’s often said that the best offense is a good defense. In the case of debt ceiling stocks to buy that means buying defensive stocks.
NextEra’s name implies a focus on renewable energy and the company has a number of renewable energy projects in its portfolio. As Larry Ramer reminded InvestorPlace readers, all of these projects are in the United States. That means it will benefit from the tax breaks for clean energy projects passed by Congress in 2022.
But NextEra Energy is also a traditional electric utility with one of its largest service areas being in Florida. That means that the company will continue to grow both revenue and earnings on a year-over-year basis.
NEE stock is currently valued at around 22x earnings and pays an attractive dividend with a current yield of 2.51%.
Occidental Petroleum (OXY)
One of Warren Buffett’s favorite stocks as of late has been Occidental Petroleum (NYSE:OXY). Buffett recently increased his stake in OXY stock.
It’s no secret that Buffett was buying OXY stock throughout 2022. But in a year when oil prices have been volatile, it’s worth noting that Buffett has continued to buy shares of the stock. In fact, his hedge fund’s total stake in the company is now over 24%.
As with many things in life, as the debt ceiling deadline approaches, the devil is in the details. And one sticking point has to do with accelerating the process for approving new energy projects.
The Biden administration wants that acceleration limited to clean energy projects. The Republican-led plan out of the House of Representatives is pushing to include fossil fuel projects.
Nobody is perfect, and that includes Buffett. But his recent purchase has to at least make you take notice. This is true with OXY stock trading for around 6.7x earnings and with analysts projecting an earnings upside of over 19% for the rest of the year.
Coincidentally, that’s almost exactly the percentage gain analysts project for the company’s stock.
SPDR Gold Shares (GLD)
If you’re looking for an investment that can help guard your portfolio against a worst-case scenario, consider the SPDR Gold Shares ETF (NYSEARCA:GLD).
This is a way to invest in an alternative to the U.S. dollar without owning the physical metal.
Gold has become an attractive investment even as inflation is down from the 40-year highs it reached in 2022. The spot price of gold is up 8% in 2023 as of the market close on May 18, 2023. And many people believe that the price of gold will continue to go higher no matter what happens with the debt ceiling crisis.
If the debt ceiling deadline passes without a deal, then many investors will likely flock to gold in an attempt to protect their wealth. But if a deal is reached without spending cuts, inflation is likely to remain above the Federal Reserve’s preferred target.
Either option is bullish for the SPDR Gold Shares fund which is the largest precious metals ETF with $59.44 billion of assets under management (AUM). The fund also has an attractive annual expense ratio of just 0.40% which is significantly below the average of its peers, which is currently around 0.69%.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.