So in this issue we’ll outline our thinking on major variables in an uncertain global economy, and why we’re especially keen on specific holdings even in these volatile times. If you haven’t invested in these stocks yet, we hope you’ll find a place for them in your portfolio given their stability. And, of course, all of them pay a healthy dividend while you wait for the world’s economies to make up their minds.Strategic planning to forecast risks and opportunities is the hallmark of organizations that thrive over generations. Likewise, at Global Income Edge we look at risks and opportunities when deciding which companies earn a spot in our portfolios.

Here are three scenarios, and the best and worst moves in each.

Scenario 1:                                                      A Rate Increase

Should the Federal Reserve increase rates, given the weakness of the global economy? Some analysts think an increase in late 2015 or early 2016 would spark a global recession, while others believe keeping rates low will continue to create assets bubbles. Some just want a rate increase as a Fed show of confidence that the economy is strong enough to withstand this move toward normalcy.

Recommendation: Stay the course.

We believe it’s possible some rate action by the Federal Reserve will occur in the next six months, but the rate increase will be so gradual that investors will continue to be well-served by higher-yielding income investments in our Conservative Portfolio, with a particular focus on utilities, telecom and infrastructure firms. 

If Morgan Stanley bankers are right and we tip into a global recession, with the Fed forced to pump more money into the economy, these income investments will become even more valuable as government yields would again drop.  

If the Fed raises rates and growth is still weak, which it has been, we could be in for a recession or at least slower growth. This scenario favors our current defensive stance but not technology, energy (ex-utilities), financials, materials and consumer discretionary stocks.  Despite a global slowdown, growth in emerging markets is still predicted to be higher than in advanced economies and continues to favor multi-nationals, such as those in our portfolios, to bridge the growth gap and offer diversification.

Scenario 2:
A Continued Commodities Rout

We know that commodity markets will eventually rebound. Demand will come from global growth that will increase the need for energy resources and commodities. And if supply is cut back enough, prices will rise. When either of these two possibilities will happen is the multi-trillion-dollar question.

Certainly, commodities forecasters can’t agree on the answer.

Ed Morse, Citigroup’s global head of commodities research, said the worst slump in commodities prices in a generation isn’t over because of continued cost deflation.

China’s economy, the biggest market for grains, energy and metals, is expanding at the slowest pace in two decades just as commodities producers struggle to ease surpluses.

On the other hand, PIMCO has said that oil is poised to gain over the next 12 months and other commodities producers are shelving projects and scaling back output, leading to a decline in supply.

Recommendation: Go for wires and pipes.

If commodities are likely to be cheap for some time, the best investments won’t be those that make or mine the commodity, but rather those that distribute or use it. These are wires and pipes firms.

Cheap natural gas will benefit electric utilities that can deliver electricity at a much cheaper price, as well as natural gas utilities (known as local distribution companies, or LDCs). In most cases where the utility is regulated, it’s insulated from the price of the commodity and can pass on any potential natural gas price increase through rates.

That’s why we recommend Conservative Portfolio holding Southern Company (yield: 4.8%). It recently bid for LDC giant AGL Resources, proof that electric utilities want a piece of this crucial infrastructure.  We also recommend National Grid (yield: 6.29%), which has an extensive natural gas distribution network in the Northeast.

Buy SO to $55 and NGG to $74.

Companies that would not do well in a low-priced commodity low-growth environment are energy (ex-utilities), materials, consumer discretionary and technology.

Scenario 3:
European Market Moves

Despite Europe’s troubles, its stock market is doing better than ours. My colleague Ben Shepherd, in a recent article entitled Easy Money in Europe Helps Stocks, reported that the American economy grew 0.6% in the first quarter and 3.9% in the second, but our own Dow Jones Industrials Average is down 9.8% so far this year. The Euro Stoxx 50 Index, which tracks European blue chips, declined just 1.9%.

In fact, most European economies are performing better than our own, despite the growth disparity. So, what’s the difference?

While our own Federal Reserve has effectively halted its program of quantitative easing (QE), the European’s own version of QE is still going strong.

The European Central Bank (ECB) has been buying $67.37 billion of assets a month since March, in a bid to boost inflation in the region. ECB chief Mario Draghi has also said that if the current level of QE doesn’t do the trick and European inflation fails to reach its 2% target by 2017, the bank could boost or extend the program.

Although we don’t advocate investing based on central bank policies, we believe what makes Europe attractive is that its earnings growth is better than in other regions of the world. The stimulus is only icing on the cake.

A recent research report from investment bank Lazard, Finding Value in Europe, found that earnings from European corporates are down close to 40% from pre-crisis levels, while U.S. peers are now more than 25% above these levels.

This led Lazard to describe European stocks as “an exciting opportunity,” because the weak euro will drive business, as will low oil prices and cheap money from quantitative easing. “What’s more, we have started to see the first signs of this domestic recovery,” the report said.

Looking at the best and worst case, the stocks most likely to recover are European financials, consumer discretionary and telecommunications. Profits for European utilities, however, are being hurt by energy efficiency measures and renewables markets, and consumer staples may lag in a recovery depending on how globally diversified the company is.  

Recommendation: Focus on infrastructure industries.

We’re not ready to call a strong recovery in the Eurozone. For one thing, even the United States was hurt by slowing global growth after stocks collapsed in China and in emerging markets. So we believe it’s likely that Europe’s recovery may also happen in fits and starts like the U.S. recovery.

Consequently we advise investors to remain in sectors that offer pricing power and global diversification, areas such as telecommunications and healthcare. Our #1 Best Buy continues to be Vodafone, which has held its value well during the global correction, (up almost 4%) and which offers a dividend yield of 3.26%.

Buy VOD up to $39.