While the recession may be over, the U.S. economy still doesn’t seem to be out of the woods. The stock market continues to be volatile, lender CIT Group recently filed for the nation’s fifth-largest bankruptcy, and unemployment remains stubbornly high.
So could this nascent recovery still be blown off course? We asked five money managers and financial gurus to share their worst-case scenarios for the market and the economy. From runaway inflation to sky-high deficits that force the government to slash Social Security and Medicare, we found five fears that still keep the experts up at night.
Not to suggest that these scary scenarios ought to make you hit the panic button. Just consider it a stress test for your portfolio: Are you diversified enough to provide protection if the market goes south, or are you betting the farm on a best-case scenario? Inflation is a recurring theme in our experts’ nightmares; you can hedge that risk by owning inflation-protected securities and boosting your exposure to international markets. That way, you should be able to get a decent night’s sleep no matter what happens.