Many Wall Street forecasters warn that as the US stocks climb to a series of new highs in 2024, the market may experience a bubble - and investors concerned about this situation should put their funds into a few select assets to protect themselves from the eventual bursting of the bubble.

Top economists and founder of Rosenberg Research, David Rosenberg, has been warning for months that a stock market crash may be imminent. In the past, he has warned of a potential 39% pullback in US stocks, which is one of the more extreme predictions on Wall Street, with most investors feeling optimistic due to the solid performance of the US economy and the slowing policy rates.But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.Feel optimistic.

In a report to clients, Rosenberg said, "Observing the market now is like watching a clown inflate a balloon, and when this huge bubble bursts, the scene will be very spectacular."

Rosenberg points out that investors need to remain cautious, avoid herd mentality, especially towards the enthusiasm for large-cap technology stocks. Instead, he recommends investors focus on stocks with strong business models, robust growth, and attractive prices, and add some "insurance" to their portfolios.

Here are his top investment recommendations for preparing for a potential market bubble burst.

Medical Care and Consumer

Investors should focus their investments on sectors that people will always need in the future. Rosenberg particularly recommends paying attention to the healthcare and consumer goods sectors.

Rosenberg wrote: "Focus on what people need, not what they want - anything related to e-commerce, cloud services, and home office setups is in the nascent stage of structural growth."

Utilities

Utility stocks also show promising prospects. Other forecasters predict that utility companies will experience significant gains due to the increase in demand for electricity and data centers brought on by the AI ​​boom.

Rosenberg said: "As we have long said, utilities are the closest 'no-brainer' investment choice, and with strong and long-term prospects for US power demand enhancing profit visibility, utility stocks have been reclassified as 'defensive growth.'"

Aerospace and defense

He also added that given the increasingly intense geopolitical tensions worldwide, aerospace and defense stocks may also be worth buying.

"Aerospace and defense has always been our long-term call. It is the best hedge against the increasingly turbulent world, as military spending around the world is expanding - and not affected at all by the US presidential election on November 5th."

Large technology.

Rosenberg said that although some parts of the technology sector show signs of a bubble, given the popularity of remote work, cloud computing, and working from home, investors can still find opportunities in some large technology stocks. However, he advises investors to wait for better price levels to buy these technology stocks.

Rosenberg said, "I would prefer to seize these opportunities at better price levels than today because recent sharp increases have eroded future expected returns, keeping us cautious at present. But in the event of any significant pullback, we will actively buy."

Safe choices.

Investors should add a "safety net" to their investment portfolios. This means gold - Rosenberg calls it the "most genuine store of value," along with government bonds.

"The beauty of gold lies in the fact that it is not a debt that can be easily waived by a central bank, nor is it a currency that can be printed at the government's command. I also favor the US bond market, as it has among the highest yields in virtually any major industrialized country - and has great liquidity."

Rosenberg said,Real Estate Investment Trust（Real Estate Investment TrustsIt can also be a good way to hedge risks. This is especially true for REITs related to industrial and healthcare sectors.

He added, 'In any case, we must become more thematic and thoughtful in the decision-making process, and more selective than usual, as the US stocks and financial assets have overall become purely a momentum gambling arena.'

However, most forecasters on Wall Street still expect strong performance for the US stocks by the end of this year and in 2025. Goldman Sachs, UBS, Bank of Montreal, and Deutsche Bank have all recently raised their year-end target prices for the s&p 500 index, with the new forecast range between 5750 and 6400 points.

Editor/rice