Best Bear Market Strategy: Remain Invested in Stocks - Barron's

By every measure, the overall stock market is at or near all-time highs. Despite record stock prices, there are some experts that believe the good times aren't going to last forever -- and investors need to be prepared for the reckoning.

That may all be coming to an end, however, as Lamendorf sees fundamentals headed the wrong way. Wall Street is looking askance at its erstwhile hero Donald Trump, as the White House sinks into disarray. With stocks on the downswing, now's the time for this bearish bet. High yield bonds have been big winners this year thanks to the Federal Reserve's lower for longer interest rate policies. Four ETFs to own to prepare for the coming market selloff.

It has been lightly edited for brevity and clarity. Tell us about the first area you're concerned about, the real estate sector. I've hated REITs for years, but they've acted like Teflon against the market. During this so-called Trump rally, they've been one of the worst performing groups.

We're short Macerich MAC and Kimco Realty KIM recently hit a week low.

The fundamentals and the technicals are in place for a big drop. The next serious correction we have, there's going to be serious pain in these stocks. What about the next sector, automotive finance? Loans are at record highs and it's not sustainable. As a result, we're shorting AutoNation AN and Credit Acceptance Corp.

CACC , which is the largest subprime auto credit provider.

Your next short, Caterpillar CAT , may be even more controversial than the last, because of the pending infrastructure buildout the Trump administration has promised. Caterpillar has pulled forward a tremendous amount of business the last three to five years.

The quality of their earnings is very poor. And despite the seemingly high stock price, they've been manufacturing it by buying back a lot of stock. Right now, they're being run very poorly. Alibaba BABA , your last pick, has been mentioned a lot because of some concerns about products it sells on its platforms, but so far, nothing has happened yet. So what makes you so bearish? We think Alibaba is allowing very fraudulent deals to be cut on their platform. A lot of their volume is being created that shouldn't be by selling counterfeit items, and as a result, we think there's some cleaning up of sales they will have to do.

When they do that, there's going to be a big restructuring and the stock isn't priced for that. Originally published March Action Alerts PLUS is a registered trademark of TheStreet, Inc. You are using an outdated browser.

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The 4 Best Funds for the Next Bear Market

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