The end is nigh! Yet again.

The media’s prophets of doom are warning of imminent financial catastrophe. But they get paid to alarm you, to boost ratings and clicks.

Yes, investing conditions are tough, but how bad will they get, really? Let’s weigh the pros and cons, and how you should trade now.

First, the reasons for optimism. Consumers are still spending (although confidence has dipped). Corporations are posting decent (albeit slowing) earnings growth. Personal and corporate balance sheets are healthy. Technological innovation (the cloud, 5G, the Internet of Things, etc.) is planting the seeds for the next great bull run.

Supply chain woes are showing signs of easing, which should eventually alleviate inflation. And as the July 4 holiday looms, we’re getting a modest respite from high energy and gasoline prices. The OPEC+ cartel this month accelerated its quota increases for July and August, in expectation of higher global oil demand.

Let’s turn to the negatives. The year started with asset bubbles, from growth stocks to cryptocurrencies, that were stoked by Federal Reserve largess. Now, to combat raging inflation, the Fed is tightening, prompting investors to run for cover.

Bearish conditions in the broader market have sent the high-flying crypto sector crashing to earth (more about crypto, below).

And this week, the data made it official: U.S gross domestic product (GDP) contracted in the first quarter of 2022. Many analysts (I’m not one of them) currently fear that the economy will contract again in Q2 and slip into a full-blown recession.

The U.S. Bureau of Economic Analysis (BEA) reported Wednesday that U.S. GDP in the first quarter of 2022 decreased at an annual rate of 1.6%, slightly more than earlier estimates. The Q1 GDP decline was a sharp reversal from the 6.9% increase in the fourth quarter of 2021 (see chart).

The slump in real GDP reflected decreases in exports, federal government spending, private inventory investment, and state and local government spending. Despite a record amount of cash influx into the financial system, the economy is trending below pre-pandemic levels.

A separate report Tuesday showed a decline in U.S. consumer confidence to a 16-month low. Mitigating this data point, though, is a modicum of good news from Wednesday’s BEA report: current-dollar personal income rose $247.2 billion (revised) in Q1 to $21.26 trillion.

On Wednesday, the major U.S. indices performed follows: the Dow Jones Industrial Average +0.26%; the S&P 500 -0.07%; the NASDAQ -0.03%; and the Russell 2000 -1.41%. Trading was choppy. In pre-market futures contracts Thursday, U.S. stocks were trading lower.

According to a Federal Reserve survey released Wednesday, corporate chief financial officers (CFOs) on average expect real GDP to grow 1.5% over the next 12 months, down from an expectation of 2.5% in Q1.

To determine whether the stock market decline is bottoming, earnings reports for the second quarter will be critical.

For Q2 2022, the estimated year-over-year earnings growth rate for the S&P 500 is 4.3%, according to research firm FactSet. If 4.3% turns out to be the actual growth rate for Q2, it would mark the lowest earnings growth rate reported by the index since Q4 2020, at 3.8%.

Under these conditions, how should you position your portfolio? Allocations that generally make sense now are 40% stocks, 25% hedges, 25% cash, and 10% bonds (tailor these percentages to your stage of life and appetite for risk).

Keep your eye on the long term and start building positions in sectors that historically perform well when the economy emerges from a downturn, e.g. health care, industrials, real estate, and consumer discretionary. Look for beaten-down value plays in these sectors and patiently wait for these stocks to rebound.

Clarity on crypto…

I get emails from readers asking me to shed light on cryptocurrencies. Let’s take a rational look at crypto.

Cryptocurrencies have plunged in value lately, as investors flee risk-on assets, but crypto isn’t going away. Early investors in cryptocurrencies made fortunes and crypto’s underlying technology is permanently revolutionizing the world of finance.

Watch This Video: 5 Tech Megatrends for 2022

One trend is certain: paper money is on its way out. Crypto is hastening the demise of old-fashioned cash and expediting the prevalence of digital payments.

Indeed, this could be the year that marks the biggest change in financial history…when crypto finally goes mainstream. That’s the view of my colleague, Jimmy Butts.

Jimmy Butts is chief investment strategist of the Capital Wealth Letter, one of America’s most trusted financial research advisories.

Many investors are spooked by adverse macroeconomic trends and they’re sitting on the sidelines, waiting for the next shoe to drop. But you don’t have to be a passive investor right now.

I’ve often expressed well-founded skepticism about certain crypto offerings, but I’m not a Luddite. You can still make money from crypto; the key is finding the right plays. Jimmy Butts has done the homework for you.

Jimmy has pinpointed the three best ways for investors to cash in on crypto’s coming resurgence. Click here to learn more.

John Persinos is the editorial director of Investing Daily.

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