When a dictatorial foreign power has the ability to move financial markets by announcing the widespread distribution of a highly dangerous vaccine for a global pandemic, it’s time to hedge your portfolio. Below, I’ll show you how.

First, let’s take a look at the latest bout of irrational behavior on Wall Street.

The three main U.S. stock market indices spent most of Tuesday’s trading session sharply higher, as news broke of a new Russian vaccine for the coronavirus. However, vaccine optimism gave way to economic pessimism, as fiscal stimulus talks stalled yet again. Stocks reversed direction in the last hour of trading and closed in the red.

The Dow Jones Industrial Average yesterday slipped 0.38%, the S&P 500 fell 0.80%, and the NASDAQ shed 1.69%. Stock futures Wednesday morning were trading in the green, on renewed vaccine hopes.

Wall Street initially got excited Tuesday on reports that Russia had supposedly developed a workable coronavirus vaccine. Russian President Vladimir Putin claimed yesterday that Russia has given regulatory approval for the world’s first coronavirus vaccine. Russia plans to use it in a massive immunization effort at home and to export it abroad.

American politicians looking for a silver bullet against the virus are embracing Russia’s news, to the consternation of health experts who warn of danger.

Read This Story: COVID Vaccine: Silver Bullet or False Hope?

Assuming the Russian dictator’s intentions are benign (his track record for humanitarianism isn’t encouraging), his country’s vaccine still hasn’t gone through large-scale clinical trials. Let that sink in. If you think this vaccine is safe, I have some real estate in Chernobyl that I’d like to sell you.

Would you take a vaccine (from Russia, of all places) that hasn’t been vetted through proper testing? I sure wouldn’t. Millions of my fellow Americans are skeptical about vaccines in general.

In a new Gallup poll, conducted between July 20 and August 2, more than a third of the public would refuse to take a COVID-19 vaccine, which poses a serious impediment to herd immunity (see chart).

For some diseases, herd immunity goes into effect when about 40% of a population becomes immune, such as through vaccination. But in most cases, the percentage is 80% to 95%.

Even more damning is the fact that the Gallup survey hypothetically stipulated a free vaccine fully approved by the U.S. Food and Drug Administration (FDA).

In my mind, this survey also throws cold water on Tuesday’s announcement from drug firm Moderna (NSDQ: MRNA) that it had agreed to provide the U.S. government with 100 million doses of its experimental COVID-19 vaccine in exchange for more than $1.5 billion. Moderna’s vaccine is still in development.

Drug companies are reaping a bonanza from the federal government’s rush to find a miracle cure for the virus. We may not get a workable vaccine anytime soon, but biotech industry insiders are pocketing fast profits as announced deals with Uncle Sam temporarily boost the share prices of involved companies. Perhaps Operation Warp Speed should be renamed Operation Pump-and-Dump.

Cutting corners…

A COVID-19 vaccine is a “holy grail” pursued by desperate politicians. Like the grail of Arthurian legend, the pursuit is based on faith, not science.

The FDA is under enormous political pressure to cut corners and fast-track a vaccine before the November 3 election. However, it ordinarily takes years of research and development and billions of dollars to develop a safe vaccine.

The global speed record for developing an entirely new and ultimately workable vaccine is roughly four years. Any treatment that’s rushed to the public in the coming weeks probably would be unsafe.

Logistical problems also abound. Millions of doses would have to be produced and distributed. And as the above chart shows, many Americans would simply refuse to take the vaccine, even if the FDA gave it the nod and the vaccine cost nothing.

The August doldrums…

Meanwhile, despite an overbought stock market, the U.S. economy teeters on the brink of deeper ruin with no rescue in sight. Some pundits and policymakers are still predicting a V-shaped recovery. But that ship has sailed.

Watch This Video: The Market Paradox, Explained

Food insecurity. Rising evictions. Demoralized consumers. That’s what America faces, if Congress doesn’t renew any of the $600-per-week enhanced payment for unemployed workers by September 1.

Lawmakers have known for months that the payment was scheduled to expire on July 31. The deadline has come and gone. Now, Republicans and Democrats in Congress are fighting like Siamese fighting fish over how much aid unemployed workers should get.

Last weekend while at his New Jersey golf resort, President Trump issued an executive order giving unemployed Americans a $400-per-week boost. Problem is, legal experts say the order is logistically unfeasible and probably unconstitutional.

Think Congress will soon reach a deal because the stakes are so high? Think again. A few top negotiators this week simply left town for vacation. I formerly worked in politics in Washington, DC and I can attest to the fact that nothing short of nuclear war can keep a politico from August vacation. The fiscal relief impasse will probably drag into September.

Aside from vaccine hopes, another major factor keeping stocks afloat is Wall Street’s belief that money growth is so fast it will cushion the economy whether there’s another fiscal package or not. But reality will eventually catch up with the markets. At some point, share prices will have to trade on fundamentals, which aren’t likely to support these inflated levels.

To date, the blended earnings decline for S&P 500 companies in the second quarter (on a year-over-year basis) is a dismal -33.8%. “Blended” combines actual results for companies that have reported and estimated results for companies that have yet to report.

The top performing sector so far in terms of Q2 2020 earnings growth is utilities, which brings me to my hedging advice.

Defensive growth strategies…

An exemplar of defensive growth is the utilities sector. Among the publications that I edit is our premium trading service Utility Forecaster. (My colleague Robert Rapier is the chief investment strategist.) Accordingly, I’ve provided ample analysis concerning the appeal of utilities stocks under current market conditions.

Read This Story: The Recession-Resistant Power of Utilities

Hedges also include precious metals, such as gold. Gold provides shelter during crises and it’s not too late to add some to your portfolio.

Gold has experienced a healthy run-up in prices over the past year. However, the rally in the Midas metal should continue during the coronavirus outbreak. I prefer gold mining stocks, which bestow greater potential for outsized gains than physical bullion or gold-linked funds. For details about a well-positioned gold mining play, click here now.

Take prudent proactive measures now and hunker down for the long haul. There’s no magical way out of the coronavirus crisis. I continue to believe that 2021 will witness a robust economic revival, but we have to get through this rough patch first. What will eventually contain the coronavirus? I can’t say, but I do know it won’t be Vladimir Putin.

Questions or comments about crisis investing? You can reach me at: mailbag@investingdaily.com

John Persinos is the editorial director of Investing Daily. He also edits our income-oriented publication, Utility Forecaster.