Fortune

Safety Meets Strength

Rising interest rates and geopolitical tensions are creating new threats to global growth. The best move for investors? Buying companies that are strong enough to control their own destiny, no matter what the economy does.

NINE-AND-THREE-QUARTER years old. If the bull market were a child, it would be in the fourth grade, learning the state capitals and perhaps long division. But as stock runs go, this one’s a centenarian. It’s the longest bull market on record, if not quite the best—the S&P 500’s 333% rise from 2009 to its most recent peak in September is still shy of the dotcom boom’s 417% gain. But now more than ever, as they tick off the days toward this bull’s 10th birthday in March, investors seem anxious about that longevity. That’s the concern that Andrew Slimmon, managing director and senior portfolio manager at Morgan Stanley Investment Management, hears most often from clients: “It’s been nine years. We’ve gotta be nearing the end of this thing.”

That feeling has become more acute throughout 2018, in which there have been not one but two 10% stock market corrections. Contrast that with the beginning of the year, when “you had this sugar high” from tax reform and a government spending spree, as Saira Malik, head of global equities at Nuveen, puts it. It’s safe to say that high has worn off. U.S.-imposed tariffs have counteracted some of those corporate tax savings. The Federal Reserve has consistently marched interest rates higher, because that sugar high has accelerated economic growth and revived long-dormant inflation. Big tech—the so-called FAANG stocks that have been the engine driving much of the market’s rise the last few years—have signaled that they might not be able to grow as fast anymore. If you’d been missing your old friend volatility, just count the number of days this year when the stocks of S&P 500 heavy-weights Amazon and Netflix closed either up or down at least 5% from where they opened. (There were a mind-boggling 25 collectively.)

It remains an open question whether the bull market will make it to middle school age. (A bull market doesn’t officially end until there’s a bear market—a drop of 20% from the peak.) But regardless of the overall direction, investors need to equip themselves appropriately for a new stage of this economic cycle. And the good news is that the global economy still shows strong signs of health. “At the end of the day, I don’t see enough indicators that the economy is entering a recession next year,” Slimmon says. “It leads me to believe that this is more of a pause within a bull market.”

On the plus side, recent selloffs have left many blue-chip stocks looking cheaper than they have in years. GDP growth topped 4% in the second quarter, the fastest expansion since 2014, and unemployment, at 3.7%, is at a 49-year low. It’s possible, says Melda Mergen, deputy global head of equities for Columbia Threadneedle Investments, that this bull

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