A slowing economy requires investors to become more selective and take a long-term view while also looking for stocks and other investments that might fare better in a sputtering economy.
Companies involved in agriculture, fertilizer and commodities are poised to do well because of increasing demand from fast-growing economies including China and India, said Todd Salamone, vice president of research at Schaeffer's Investment Research in Cincinnati.
"Despite all the talk about recession, despite all the slow growth -- these are the sectors that have bucked the trend," he said.
Salamone noted that while these stocks already have had a good run, they're still worth betting on because they're less likely to suffer under the vagaries of the U.S. economy than, say, the retail, housing and airline sectors.
Although Salamone sees the wisdom in buying when a sector has been beaten down and making contrarian moves to scoop up bargains, he believes that investors should remain cautious about the financial sector. Financial services companies from investment banks to mortgage writers have been hard hit by souring mortgage loans and have seen their stock prices fall sharply.
"Over the next three to 12 months, anyway, we'd say it might be too early," he said of financial stocks. "Five to 10 years out they might be great plays but over the next year or so we just think it's too early. There's too much uncertainty, there's too much bottom-fishing in that area."
Hard as it might be, setting aside emotion and looking toward long-term goals can help investors focus on sectors that show solid growth prospects.
Gordon Ceresino, vice chairman of Federated Investors' MDT Advisers, contends that employing an investment strategy that extends over at least seven years can help investors look past the day-to-day swells and swoons of the stock market and help them resist the temptation to sell their holdings when Wall Street gets rocky.
"They get too caught in the emotion and they will tend to zig when they should have zagged," said Ceresino, referring to professionals and everyday investors alike.
"I'm not going to make a move because someone scared me this morning and said 'The world is coming to an end,'" said Ceresino. "You need to stay with your fundamentals and not get emotional."
Investors who just can't get past their nervousness about the market can still move into areas of safety like government-backed bonds. Market-watchers urge investors to be mindful, however, of the hazards of reacting too quickly -- someone who pulls too much money out of stocks may miss out on the start of a Wall Street rally. Indeed, investors are still debating whether the economy is already in a recession or only a mild slowdown.
Ceresino said that trying to pick when to exit and re-enter the market is a daunting challenge for any investor, even a professional.
"The person that thinks they can lock in their current portfolio returns by going to cash and then time themselves back in -- what you end up doing is you end up destroying your ability to meet your long-term goal."