A lot of bad news is converging on the stock market — here’s how to deal with it

Heads up, investors: Wednesday’s selloff in the stock market may be the start of something bigger, for the five key reasons I cite below…

The good news is we’re not going to see a full retest of the March lows or anywhere near that kind of decline, thanks to several positive factors in the mix (also below).

The upshot: It’ll make sense to buy stocks after potential 5%-10% declines in the S&P 500 SPX, 0.08%, Dow Jones Industrial Average DJIA, 0.04% and Nasdaq COMP, 0.03%.

Here are some tactical suggestions.

• Focus on buying a group that I call “public space” stocks. The eight stocks I put in my public-gathering-place portfolio in my stock newsletter, Brush Up on Stocks, on March 17 were up 70.7% by the close June 15, compared with 26.3% gains for the SPDR S&P 500 ETF Trust SPY, 0.06%. As the big gainers (and the ones most vulnerable to Covid-19 resurgence fears), they will likely decline a lot, offering the best opportunity for a rebound when Covid-19 fears recede again.

If you missed this play the first time around, you will get another shot on a smaller scale. The eight stocks are: Churchill Downs CHDN, -1.27%, Royal Caribbean Cruises RCL, -0.89%, Carnival CCL, -2.09%, Planet Fitness PLNT, -3.57%, Lowe’s LOW, -1.37%, Home Depot HD, -1.15%, Howard Hughes HHC, -1.55% and Cedar Fair FUN, -3.57%. These all have solid brands, good business prospects and decent insider buying levels.

• Buy the most cyclical areas, which will also get hit the hardest. This means energy, industrials and basic materials. Consider solid names in energy like Exxon Mobil XOM, 0.20% and Royal Dutch Shell RDS.A, 1.06%, which get Morningstar’s highest (five star) stock rating, or one I like and own among mid-caps, Continental Resources CLR, 8.66%. In industrials and chemicals, there’s been compelling insider buying in TransDigm Group TDG, -0.88% and LyondellBasell Industries LYB, 3.53% over the past several weeks.

For exchange traded funds (ETFs), consider Energy Select Sector SPDR XLE, 0.22%, SPDR S&P Oil & Gas Explore & Production XOP, 0.31% and Vanguard Energy VDE, 0.34% in energy; Industrial Select Sector SPDR Fund XLI, -0.11% and Vanguard Industrials VIS, -0.14% in industrials; and Materials Select Sector SPDR XLB, 0.02%, Vanguard Materials VAW, 0.08% and iShares Dow Jones US Basic Materials IYM, +0.41% in basic materials.

• Own gold or gold-mining stocks. They are a hedge against potential weakness. Consider SPDR Gold Trust GLD, -0.11%, iShares Gold Trust IAU, -0.22%, VanEck Vectors Gold GDX, -0.66% and VanEck Vectors/Jr Gold Miners GDXJ, -0.48%.

­• Don’t get too aggressive in…

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