Different investment options in case the US defaults

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By: skyden.dredge
on 29th Jul,2011

The country is sitting at the edge of a cliff. Chances are there that the country may default on its outstanding debts on and after 2nd August.
Different investment options in case the US defaults


The country is sitting at the edge of a cliff. Chances are there that the country may default on its outstanding debts on and after 2nd August. If this happens in reality, the leading rating agencies such as the Moody's and the Standard & Poor's will in all probability downgrade the rating of the country from AAA or Aaa. Even if some kind of arrangements are made to raise the debt ceiling in the short run, chances are quite high that these rating agencies will downgrade the nation. Whatsoever, US bonds have always been considered as safe heaven by the investors across the globe. And in recent times, the sovereign debt crisis in many countries of Europe, has added to the attraction of US paper. This has helped in maintaining low rate of interest for US paper, despite the fact that US has incurred unprecedented amount of debts. However, the safe heaven status could be hit badly in case the rating agencies downgrade US paper. So the predictions for the US paper are dire and quite naturally, increasing number of investors are willing to change their portfolio. Here are the different investments options wherein you can invest your money in case of a default. 

Invest in gold

Huge amount of gold reserve in the country acted as the necessary cushion and country borrowed heavily with its gold backing. This amply indicates the value and the preciousness of gold. Moreover, the limited supply of gold implies that its prices will increase as more and more people and institutions will invest in the safe haven of gold. Now, analysts are of the opinion that it price will increase in the near term. In case of US default, it is likely that increasing number of people and institutions will invest in gold.

Invest in high-yielding stocks

In case the US default in its debt obligations, it is likely that investment in high-yielding stocks will increase. There are some stocks such as AT&T (T), General Electric (GE) and McDonald's which are likely to fetch healthy returns to the investors. Importantly, these companies have significant amount of cash on hand and strong earning growth. In fact there are a handful number of public companies which offer excellent earning opportunities to the investors. It is less likely that these companies will default in their dividend payouts.

Invest in corporate bonds

There are numerous companies in the country with very strong balance sheets. Bonds of few American companies such as Automatic Data Processing Inc. (ADP), Microsoft Corp. (MSFT), Johnson & Johnson (JNJ) and Exxon Mobil (XOM) have AAA ratings. There are indeed options wherein you can invest your money.

Invest in Swiss francs

Switzerland boasts of a healthy balance sheet. Billions of dollars are pouring into Swiss francs in recent times. The value of francs has increased from $0.95 to $1.25 within a year. Currently, investing in Swiss currency is indeed an attractive proposition.

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