There's a tried-and-true maxim on Wall Street: Stocks fall a lot faster than they rise. There are myriad examples, and the sharp plunge of 1987 is just one.
The economy was growing at a nice clip, corporate profits were on the rise, and investors were pouring into the market. And then, "Black Friday" came on October 19, 1987, pushing the S&P 500 down more than 20% in a single day. The fact that stocks had risen 250% in the previous five years led to a great deal of complacency, as few potential land mines stood onthe horizon.
Looking back, we still don't even know what caused the crash. Some think it was due to computer-driven trading programs that fed off each other in a cycle of negativity, or that maybe underlying derivatives had lost enough value to cause a cascading effect of unwinding contracts. Others simply suggest that the market was due for a breather and a mild sell-off turned into a panic-driven rush for the exits as they day wore on.
We'll never know.
Fast-forward to 2012, and the skies are again seemingly clear. In fact, we've just emerged from a risky phase for the global economy, and the economic backdrop holds few land mines in the near-term. But still waters run deep, and you have to always think about the risks of a seemingly benign market mood. So it's simply prudent to make sure that, at this phase in the market cycle, your portfolio also contains a handful of deeply defensive stocks that will more likely hold their own if the major indices slump badly.
Here are five stocks that have "bomb shelter"-like qualities...