The woes currently bedeviling global financial markets are enough to make an investor reach for the Valium. Below, I offer a more practical way to cope.

As we entered September, it seemed as if the stock market was turning the corner. Instead, it took a turn for the worse, as the Federal Reserve’s aggressively hawkish stance spooked investors. Rising Treasury yields and the inverted yield curve suggest a U.S. recession is imminent, if not already underway.

After a robust summer rally, stocks have retested June lows. Dismal economic conditions in countries such as China and the United Kingdom are exacerbating concerns that the global economy is sputtering. Russian President Vladimir Putin’s maladroit military draft, to assist his losing war in Ukraine, is heightening geopolitical anxieties and putting pressure on Europe’s energy needs.

The CBOE Volatility Index (VIX), also known as the “fear index,” hovers at 31, well in excess of its longer-term average of about 20. The U.S. dollar has soared to a 20-year high, whereas the pound sterling has plunged to historically weak levels. Historically, a strong U.S. dollar has caused worldwide financial pain.

Economically sensitive commodities are dropping in price, due to expectations of lower demand amid slower economic activity. Crude oil and copper both looked bullish in April; that’s no longer the case. That’s a worrisome sign that economic growth is sputtering. The per-barrel price of West Texas Intermediate has slumped below $80 per barrel.

Commodities prices are leading indicators for the overall economy and inflation; their recent declines could presage recession. The silver lining, though, is less upward pressure on producer and consumer prices. We’ll get the latest reading of the U.S. personal consumption expenditures (PCE) price index on Friday. If it comes in hotter than expected, the Fed will have further justification to remain hawkish.

WATCH THIS VIDEO: Reasons for Investor Optimism (No, Really!)

However, when it comes to Fed-triggered stock declines, we’ve seen this movie before. The current Fed-induced slump is an echo of the previous tightening cycles of 1994 and 2018, during which investors fretted that monetary policy was getting far too strict. Equities declined 8.9% in 1994 and 19.8% in late 2018, but over the following six months, posted respective rebounds of 5.2% and 25.3% (see chart).

In a familiar pattern, the U.S. central bank is taking an aggressive approach on the front end, to earn inflation-fighting credibility and to create elbow room for later as it gauges the initial effects of tightening. If the Fed decides that economic damage warrants a pivot toward dovishness, we’d likely see a rally in stocks. Precedent, then, offers hope. But this pivot wouldn’t come before 2023.

As a protective measure against these headwinds, increase your exposure to “essential services” sectors that have a history of weathering tough conditions: utilities, health care, and consumer staples. In the latter category, global companies that offer well-known brands are your best bet.

More popular than Starbucks…

There’s another industry that’s evolved into an essential service provider, the identity of which might surprise you.

As fears of a recession increase, you should seek solace in marijuana…not necessarily to get high, but as a way to make money. Canna-business is better insulated than most other industries from risks such as inflation and Fed tightening, making the right pot stocks “defensive growth” plays now.

It’s an investment truism: invest in products that people will always want, in good times or bad. And when it comes to providing a product that people crave the world over, marijuana passes the test.

In fact, a recent study shows that marijuana is more popular with American consumers than the food and beverages sold by coffee giant Starbucks (NSDQ: SBUX).

In 2021, legal marijuana sales in the U.S. (both recreational and medical) outpaced all North American Starbucks sales by a wide margin. Pot sales in the U.S. in 2021 reached about $27 billion, whereas North American Starbucks sales during the same time frame came in at $20.5 billion.

During recessions, so-called sin stocks (alcohol, tobacco, etc.) tend to outperform. Add recreational cannabis to the list. Meanwhile, the need for new health treatments will persist despite the economic cycle, buoying medical marijuana stocks.

That’s why I urge you to read my new book: The Wide World of Weed and Psychedelics. It’s your definitive guide for making money in the thriving cannabis and psychedelics industries. Click here to order your copy.

Big Yield Hunting…

Maybe you’re risk-averse and prefer income investing. Tired of settling for paltry yields of 2.1%…3.4%…or even 5.8%? For big yields, turn to my colleague Robert Rapier, chief investment strategist of our new premium product, Income Forecaster.

As our income expert, Robert has devised a new investment formula that could hand you the retirement freedom you’ve always dreamed of, even in these tumultuous times. Click here for details.

John Persinos is the editorial director of Investing Daily.

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