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What the smart money is buying as the market tanks

CNN logo CNN 4 days ago By Paul R. La Monica, CNN Business
© Photo Illustration: Shutterstock / CNN

The Dow and S&P 500 are now both in the red for 2018, and investors have few places to hide as the stock market tanks. But savvy people are finding some pockets of safety.

Gold, an investment that often shines during times of financial stress, is up nearly 4% so far in the fourth quarter while the S&P 500 and Dow have both plunged nearly 10% and the Nasdaq has plummeted almost 13%.

The rise in gold prices has been good news for miners too. Newmont (NEM), which is in the S&P 500, is up nearly 10% since the end of September. The VanEck Vectors Gold Miners ETF (GDX) has gained about 7%.

Utility stocks and real estate investment trusts, which both pay hefty dividends, have held up well too. The Dow Jones Utilities Average has gained more than 3.5%. The SPDR Dow Jones REIT ETF is up more than 1%.

"Owning exciting things was more fun and profitable than owning good things," said Jon Cheigh, portfolio manager of global real estate with Cohen & Steers. "But high momentum stocks have started to come under pressure and real estate valuations are finally starting to look more attractive."

Yield plays in focus

Another clear sign investors are craving anything that can guarantee them a bit of a return: Investors keep rushing into bonds, despite the yield on the 10-Year Treasury falling to just 2.85%. The iShares 20+ Year Treasury Bond ETF (TLT) has gained nearly 2.5% this year.

Neil Dwane, managing director of Allianz Global Investors, said these more conservative investments might be coming into favor now because investors are realizing that growth in the US this year might be as good as it gets for awhile.

That's because the Federal Reserve has been raising interest rates, the global economy is slowing and the sugar rush from lower taxes and other federal government stimulus should begin to fade.

"People have started to think, 'How much better can the news really get?' The reasons to be as bullish are becoming less evident." Dwane said.

Investors chowing down on food stocks

Another area of the market has held up noticeably better as of late too: food and beverage stocks.

Many of them, like the utilities, tend to pay attractive dividends. But a lot of food and drink companies are staples or affordable luxuries -- the types of things people will continue to buy even if the economy heads south. People may even still pay up for a $5 latte but they aren't going to buy a new $50,000 car.

Starbucks (SBUX) has been one of the better performers in the S&P 500 for the past two months. Shares are up nearly 20%.

SPAM producer Hormel (HRL), frozen french fry company Lamb Weston (LW) and spice maker McCormick (MCK) have also been top gainers in the S&P 500 during the fourth quarter. So have McDonald's (MCD) and Coca-Cola (KO).

So it looks like in these uncertain times for the markets and economy, eat, drink and be merry is one way for investors to profit.

Related video: Why oil is in a bear market

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