Investment protection from Europe’s misery

By DANIEL WAGNER

AP Business Writer

WASHINGTON

Europe, a thundercloud over financial markets for three years, might burst this month into a downpour, even after a rescue of Spanish banks.

For investors who want to stay dry, some shelters look sturdier than others.

Junk bonds, companies that make consumer products and even some European stocks could add a healthy shot of profit to well-designed portfolios, analysts and traders say.

For the third straight spring, fear about Europe’s debt crisis has rattled U.S. stocks.

Spain agreed over the weekend to accept a bailout of up to $125 billion for its ailing banks, but investors are still worried that Greece will exit the euro.

The next date to watch is Sunday, when Greece has an election. If the far-left party wins, Greece may spurn the program of bailouts and steep budget cuts that has kept it afloat.

Global markets would probably whip and dive if that happens. But if the worst fears don’t materialize, global markets will probably see a short-term “relief rally.”

The trouble is that nobody knows how the European crisis will unfold. So investors need diverse portfolios that won’t crumble if things get ugly — or miss the updraft if Europe simmers down.

David Kelly, chief global strategist at JPMorgan Funds, says it makes sense to tilt your portfolio slightly toward investments valued in U.S. dollars — stocks and bonds issued by U.S. companies — because U.S. markets are likely to remain more stable.

In uncertain times, a company’s products matter. The more necessary the product, the better its producer can weather a typical economic downturn, says Jerry Webman, chief economist at OppenheimerFunds, an asset management firm.

“People are still going to brush their teeth, even if the economy gets into difficulty,” Webman says.

He likes companies that make boring yet necessary products such as food, dustpans and dental floss.

The exception: any company that depends on exports to Europe for a big chunk of its revenue.