The U.S. government promised us that a financial apocalypse like the Great Recession would never happen again.
Congress, the Federal Reserve, the Treasury Department, and governments around the world spent the last 15 years putting safeguards in place to keep that promise.
But according to S&P, Fitch, and Moody’s, another potential “cataclysm” might be less than a month away.
One that could be worse than the Great Recession and plunge the world into a financial hell we thought we would never see again.
At Intelligent Income Daily, our mission is to help you see potential catastrophes like the Great Financial Crisis coming. And to provide you with income growth strategies to not only protect your portfolio – but grow it through any bull or bear market.
Today, I’ll show you how to protect yourself from the next potential Great Recession and even how to profit from it.
The Banks Aren’t Going to Cause the Next Great Financial Crisis, But the U.S. Government Might
In 1917, the U.S. Congress created the debt ceiling. Not to prevent runaway spending but to help the government fight WWI.
Since then, Congress has raised the debt ceiling 90 times, an average of once every year or two.
The debt ceiling doesn’t stop future spending; it merely allows the government to pay the bills Congress already authorized.
Starting in 1995, politicians on both sides of the aisle began playing chicken with the global economy.
In 1995, Republicans threatened not to raise the debt ceiling to force a government shutdown.
In 2003, 2004, and 2006, Democrats – led by Joe Biden – voted against a debt ceiling increase to protest the Iraq War. (We’ve already had one debt ceiling limit increase under the Biden administration.)
The examples go on and on… And today, the government is gridlocked once again and is scrambling to avoid a debt default.
According to experts, that risk is higher than ever. And the bond market agrees, estimating a 2.4% chance the U.S. defaults on its debt on June 1.
Moody’s estimates the risk at 5%, about twice the risk of nuclear war with Russia.
The odds might seem miniscule. But 2008 also seemed like a fraction of a possibility at the time. So it’s important to pay attention.
What would be the effects of a debt default?
It would depend how long it would last. But here are the Joint Economic Committee’s estimates of what a three-month default would likely mean.
The economy would contract 5%, more than the 4.6% decline in the Great Recession.
1 million Americans would lose their jobs, equal to the Great Recession. That’s almost as many job losses as people who live in New York City.
The stock market could fall 45% from here, a peak decline of 53%, resulting in the fourth-worst market crash in U.S. history.
That’s potentially $20 trillion of stock market wealth wiped out in a matter of weeks.
And it would crush retirement dreams across the country and around the world.
Again, there is a 95% chance this doomsday scenario won’t happen. So the odds are in our favor. But luck favors the prepared.
And stocks are likely to sell off hard before Congress finally acts to raise the debt ceiling for the 91st time.
In fact, Moody’s chief economist thinks the Dow might have to fall 2,000 points or 6%, in a single day before Congress gets scared enough to do its job.
So how can you protect yourself from the coming market volatility… and potentially profit from it instead?
Bonds: Your Market Crash Salvation
According to Duke University, 92% of the time, long-duration U.S. Treasurys have been the best asset to own since WWII when bears rampage down Wall Street.
Since 2000, the average bear market has seen the S&P 500 fall 34%. Meanwhile, long bonds, such as iShares 20+ Year Treasury Bond ETF (TLT), have averaged almost 45% gains.
In the 2011 debt ceiling crisis, TLT soared 35%. And as you can see from the chart, long bonds soared as much as 75%, depending on what ETF you owned during that time.
Long bonds that were hammered during the 2022 interest rate spike now offer 35% to 75% upside potential. That’s during a potential debt ceiling-fueled market crash.
Meaning you can use the profits from selling them to buy the world’s best blue-chip stocks at the best valuations in years or even decades.
Selling excess bonds to buy more undervalued blue-chip stocks is the perfect strategy to profit from the debt ceiling crisis. The average 12-month bull market rally from the coming bottom is 48%.
Individual stocks could soar as much as 100%… in one year following the coming market mayhem.
This is how the greatest investors make their fortunes.
And you can do this all while cutting your portfolio’s declines by 50% to 66%.
That’s the power of the greatest hedging asset in history.
And that’s how long bond ETFs like TLT can help you sleep well at night in the coming market mayhem and even profit from it.
And TLT is just one example. There are several ETFs that performed more than twice as well as TLT and other ETFs during past crises. And we share those names in our Fortress Portfolio.
Fortress Portfolio is built to withstand market volatility, recessions, record-high inflation, interest rate hikes, and any other economic setback. It can help you prepare for the worst by positioning yourself for the best – the key to navigating these crazy times.
So don’t wait to find out what happens a month from now with the debt ceiling crisis. Add long bonds to your portfolio today.
Analyst, Intelligent Income Daily
P.S. I recently recorded a video about our favorite overall strategy to profit regardless of what the overall market is doing: purchasing dividend-growth blue-chip stocks.
In the video, I’ll show you how even when you make mistakes and lose money, they can help secure your long-term wealth. To hear the real-life stories of how some of the smartest investors, famous celebrities, and regular folks like you and me were able to do this, click below.
And if you enjoy video content like this, please let me and the Wide Moat team know by clicking here.