There’s an old saying on Wall Street, often attributed to Warren Buffett: “When the tide goes out, you can see who’s swimming naked.”

Well, it’s low tide. And the scene isn’t pretty.

Overvalued stocks are getting punished, as the coronavirus and a litany of other problems come to the fore. Momentum growth stocks have taken the hardest beating, as investors flee to bonds, hedges and safe havens.

Earlier this week, government officials in Washington and Beijing claimed that the coronavirus was under control. If you believe that, I have a bridge in Brooklyn to sell you. Not only is the coronavirus far from contained, it’s rapidly spreading.

As of this writing on Thursday, at least 80,000 cases of coronavirus cases are confirmed, with more than 40 countries affected. The death toll stands at over 2,700, most of them in the country of origin, China. South Korea reports hundreds of cases and Italy has placed about 50,000 people in quarantine.

The coronavirus is undercutting factory activity, as entire cities get locked down and isolated. The financial markets are forward looking, which means they’re anticipating the coronavirus-induced manufacturing pullback to eventually show up in gross domestic product numbers and corporate earnings.

Global growth already had been sputtering. The coronavirus could be the coup de grace that pushes the world economy into recession.

Stocks yesterday struggled to shake off coronavirus fears, at one point trading in the green. The rebound wasn’t to last. The major U.S. indices lost traction as bad news about the coronavirus poured in. The S&P 500, Dow Jones Industrial Average, and NASDAQ composite all closed sharply in the red yesterday, in extremely volatile trading. Crude oil prices fell for the fourth consecutive session.

U.S. bonds rallied yesterday, pushing the benchmark 10-year Treasury yield to a record low for the second straight day, as traders fled to safe haven investments.

And today? Before the opening bell this morning, the three major U.S. stock market indices were trading deeply in the red. Dow futures dropped 200 points, or 0.7%, in the early hours of Thursday. The health contagion is becoming a financial contagion and no amount of positive spin from officials at press conferences can stem the tide.

Many European and Asian benchmarks are now in negative territory for the year, as global markets price in a substantial economic slowdown because of the virus.

As the following chart shows, the spread of the disease (dubbed COVID-19) outside of mainland China has accelerated:

Stocks have embarked on a dizzying multi-day plunge. Some investment advisers say conditions are opportune for bargain hunting, but it’s dangerous to attempt to time the bottom of a market crash. What’s more, any rebound at this point is likely to be a “dead cat bounce.” This virus will take a lot longer to play out.

Read This Story: Coronavirus: Looking a Black Swan in the Eye

The coronavirus has served as the trigger for declines, but it’s not the only negative factor at work. Key economic indicators have been turning negative and at the same time, costly tariffs remain in place.

Corporate earnings growth is weakening. Public and corporate debt is mushrooming. Yes, interest rates are low, but that’s a double-edged sword. If the Federal Reserve needs to step in to stimulate the economy, the central bank doesn’t have much leeway left.

The U.S. Centers for Disease Control and Prevention (CDC) on Tuesday urged Americans to prepare for the virus to spread to these shores. The warning marked a stark change in tone from previous pronouncements from the agency that downplayed the virus.

On Wednesday, the U.S. Food and Drug Administration warned that the outbreak was on a path to becoming a pandemic. A pandemic is defined as occurring over a wide geographic area and affecting an exceptionally high proportion of the population.

Fortress America often thinks it’s immune to epidemics that start in places as far away as China. But in today’s interconnect world, bad news spreads at the speed of a contagious pathogen.

Proactive steps to take now…

The following advice is an expansion of previous points covered in my February 25 article, 7 Steps to Survive Coronavirus Sell-Offs.

Certain defensive sectors, notably utilities and real estate, are shrewd ways to protect your portfolio from the epidemic. Sectors vulnerable to supply chain disruption, such as industrials, have fallen the farthest during the last few days.

As the coronavirus spreads, export-dependent companies with greater overseas exposure will continue to get hit the worst.

Utilities stocks are appealing now. Protected from competitors, utilities can become entrenched as a dominant economic force in an entire community.

Read This Story: The Recession-Resistant Power of Utilities

Everyone needs heat and power, regardless of economic cycles or viral epidemics. U.S.-based utilities derive zero revenue from overseas. For our “dividend map” of high-yielding (but safe) utilities stocks, click here.

Another smart strategy is to tap into unstoppable mega-trends that will unfold regardless of short-term shocks. One such trend is the global roll-out of 5G, the fifth generation of wireless technology.

Read This Story: 5G: The Fight for the Future

The companies involved in developing and deploying 5G will richly reward investors who act early. Want details on how to profit from 5G? Click here now for our latest 5G report.

Make sure at least 25% of your portfolio is allocated toward hedges. I define “hedges” as precious metals such as gold and silver, real estate investment trusts (REITs), and commodities, among other investment classes. Choices depend on your investment profile and how much risk you’re willing to shoulder.

Real estate stands out. As with utilities, real estate stocks are resistant to geopolitical threats because they fall under the purview of essential needs. There’s a finite amount of space on earth and human beings will always need land.

There’s an under-the-radar investment opportunity in real estate right now that most investors don’t know about. Last year an obscure loophole allowed a handful of regular Americans to take back over $6.6 billion of the mortgage payments they made. If you want to join in the profits, click here to get started.

Despite the soothing assurances you might hear from self-interested politicians, the coronavirus is a real threat. This is one of those rare instances when the mainstream press isn’t hyping the story. The mounting death toll speaks for itself. Prep now for the pandemic.

John Persinos is the editorial director of Investing Daily. Send your comments and questions to: mailbag@investingdaily.com