Core Viewpoint - The current market is considered expensive, with the Shiller CAPE ratio at 39.6, indicating a potential correction or bear market is likely approaching [1][2] Market Context - Historical data shows that corrections of 10% are common, with the S&P 500 experiencing an average annual correction of at least 10% since 1950, and a 20% correction occurring every three to five years on average [2] Defensive Investment Strategy - Defensive sectors such as healthcare, consumer staples, and utilities are expected to perform well during market corrections and bear markets [3] - Dividend stocks are highlighted as favorable investments during sideways and bear markets due to their income generation [3] Selected Stocks for Mini Portfolio - A mini portfolio of eight stocks, all classified as Dividend Kings (companies that have increased dividends for 50 consecutive years), is recommended for market drawdowns [4] - These stocks are positioned in defensive sectors and offer dividend yields above the S&P 500 index yield of 1.25% [4] Individual Stock Highlights - **Coca-Cola (KO)**: Dividend yield of 2.9%, increased dividends for 63 years, current price around $70.61, market cap $303 billion [5][6] - **Procter & Gamble (PG)**: Dividend yield of 2.86%, increased dividends for 69 years, current price around $147 [7] - **Johnson & Johnson (JNJ)**: Dividend yield of 2.7%, increased dividends for 62 years, current price around $186.57, market cap $450 billion [8][9] - **American States Water (AWR)**: Dividend yield of 2.54%, increased dividends for 71 years, current price around $74.84, market cap $3 billion [10][11] - **Northwest Natural Holding (NWN)**: Highest yield at 4.21%, increased dividends for 70 years, current price around $47 [12] - **Genuine Parts (GPC)**: Dividend yield of 3.3%, increased dividends for 69 years, current price around $127 [13] - **Marzetti Co. (MZTI)**: Dividend yield of 2.21%, increased dividends for 62 years, current price around $172 [13] - **Becton, Dickinson (BDX)**: Dividend yield of 2.35%, increased dividends for 53 years, current price around $178 [14] Total Investment Overview - The total cost to purchase one share of each of these eight stocks is approximately $1,000, creating a defensive income-generating portfolio [15]

Core Viewpoint - David Rosenberg, founder of Rosenberg Research, expresses a bearish outlook on the economy and markets, particularly highlighting concerns over high valuations in the S&P 500 and potential negative returns [2][4]. Valuation Concerns - The Shiller cyclically adjusted price-to-earnings (CAPE) ratio for the S&P 500 is currently around 37.5, marking it as the third-most expensive level in history, following peaks in 2021 and 2022 [3][4]. - Historical data indicates that when the Shiller CAPE ratio exceeds 35, one-year forward returns have consistently been negative [6][8]. Economic Context - The labor market is showing signs of slowing, with job growth averaging below 100,000 per month over the past four months, and a significant downward revision of 911,000 jobs added in the past year [9]. - Rosenberg emphasizes that the combination of high valuations and a weakening economic backdrop raises skepticism about the sustainability of the current market rally [4][9]. Predictive Value of Valuations - Valuations are considered reliable predictors of long-term stock market performance, with Bank of America data suggesting they can explain about 80% of market performance over the subsequent decade [5]. - In contrast, short-term performance predictions based on valuations are less reliable, but historical instances of high valuations have led to negative returns [6].