How to Survive Market Mayhem

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Trust the dollar
Shoot for high yield, low duration
Explore domestic energy
Consider municipals

Among my missions is to advise smart readers against doing dumb things out of haste or panic.

Over the past two years, that wasn't a problem. The financial markets were uncommonly calm, and the dreaded recession was a mirage, so you could scarcely go wrong with sound dividend- and interest-paying assets.

Stocks, including high-yield categories such as energy infrastructure, grew without interruption. Fixed income was a breeze, with 4% to 5% yields on cash and short-term equivalents, or 6% to 8% from high-yield bonds, floating-rate bank loans, and newcomers such as exchange-traded funds investing in collateralized loan obligations.

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Even shares of long-suffering dividend king AT&T (T) posted a two-year 53% total return.

But in 2025, I sense serenity is giving way to a creeping climate of chaos. Besides the DeepSeek freakout and tariff attack on Canada and Mexico, investors face a debt-ceiling crisis, indications that the Federal Reserve will not cut interest rates again until at least the summer, and a steepening yield curve that stands to send the bond markets into reverse.

A bond slump would also hurt stocks because the correlation between the two grows closer by the day. In talks with strategists and portfolio managers, I hear more about fear, volatility and "uncharted waters" than I do about fresh opportunities and undervalued assets.

Yes, there are challenges. But let me quote the brilliant Baird Funds commentator Michael Antonelli, who just penned this pearl: "If you spent the last decade worrying about the national debt or politics, how did that help you grow your money?" The answer: It did not, and it will not.

So, despite the hazards I enumerated – and the specter of a Treasury default or near-miss is number one – I still resist surrendering to the urge to stash money under the mattress or, worse, to chase gold or other alternatives that yield zero.

My three-day rule remains valid: Do not sell anything due to a news event for three trading days. By then, the knee-jerk sellers are done, and rational or opportunistic buyers return to action. Four other protocols to help you through 2025:

Trust the dollar

Regardless of trade, China, conflict in the Middle East, or inflation, the buck will remain the world’s refuge.

Global capital inflows to the U.S. are rising. The Invesco DB U.S. Dollar Index Bullish Fund (UUP) is a straightforward way to ride the dollar's exchange rate.

Shoot for high yield, low duration

The safest debt investments pay well despite having the least price sensitivity to long-term interest rates.

I like the CrossingBridge Low Duration High Income Fund (CBLDX). Most bank-loan or CLO funds qualify. Target a 6% yield with little price movement.

Explore domestic energy

Oil and gas firms intend to return surplus cash flow to shareholders rather than overproduce and depress prices. It is reasonable to place at least 5%, if not 10%, of an income portfolio in pipeline and infrastructure holdings.

Plains All American Pipeline (PAA) and MPLX (MPLX), both limited partnerships, are my two favorite energy stocks.

Consider municipals

Cities and states are cash-rich, and municipals are also less vulnerable to the antics of the "bond vigilantes" who orchestrate serious Treasury sell-offs.

New 10- to 20-year, AA-rated tax-frees have current yields of around 4%, or a tax-equivalent yield of roughly 5.3% for someone in the 24% federal income tax bracket.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Kosnett is the editor of Kiplinger Investing for Income and writes the "Cash in Hand" column for Kiplinger Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.