In the past 5 days — September 12, 2011 through September 16, 2011 — we’ve seen awful retail sales, an uptick in unemployment claims, poverty at a record high, chaos in Europe, another rogue trader scandal and of course, a 700 point gain for the Dow Jones Industrials.

President Obama has proposed another $440 billion to jump-start hiring as unemployment remains stuck at 9%. Banks are still battered, consumers are spooked and the market is taking us for a white-knuckle ride again.

How can investors protect themselves? And what lessons did we learn from the previous crash?

Well, here are 2 blue chips that both weathered the financial crisis much better than their peers and managed to rally strongly off the market lows. It’s realistic to think that in the event of another crash, they would hang tough yet again.

Family Dollar Stores (Stock Symbol: FDO)

5/1/08 to 5/1/09 Return +46% versus -36% for the Dow

5/1/08 to present: +143% versus -12% for the Dow

Dollar Tree (Stock Symbol: DLTR)

5/1/08 to 5/1/09 Return +31% versus -36% for the Dow

5/1/08 to present: +259% versus -12% for the Dow

• 3 for 2 Stock Split on June 25, 2010

In financial terms, the reason for the rally can be boiled down to a single word — Risk, the same methodology, the same analysis, that led us to call the summer stock market crash of 2011, is now telling us that that risk appears that it will be coming back on full swing.

Longer term investors need to be very, very, careful — the quality of the rally that we think is here, will tell us how durable it is.

This new risk-rally could have some legs, longer term but investors should be outright bearish and analysts are predicting a retest of the March 2009 lows sometime early next year.

Jogging your memory, the ’09 low was 666 on the S&P 500 — that’s almost 50% below current levels. All of the issues that got us to the ’09 low are perhaps still there but have been pushed out to 2012.

Currently, Inflation Bonds are outperforming regular bonds and that’s an environment that’s supportive of increasing inflationary expectations and risk taking.

Gold has been very well correlated with treasuries and that’s rather unusual — gold could see a 10-20% correction in the next few months, giving long term investors who missed the boat on gold another chance to get on board.

Related Posts!

1. Timing Stock Market Crashes
2. Dividend vs Non-Dividend When the Stock Market Crashes
3. Worst S&P 500 3 Month Sell-Offs With Rebounds
4. Don’t Bring out the Champagne yet – DJIA Predicted to Bottom Out at 8200
5. The Santa Claus Rally is Also Known as the December Effect in the Stock Markets

Tags: 2012 Stock Market Crash, 3 for 2 Stock Split, Banks, Bearish, Bonds, DLTR, Dollar Tree, Dow, Family Dollar Stores, FDO, Financial Crisis, Gold, Inflationary, President Obama, Risk, Risk Taking, S&P 500, Stock Market Crash, Stock Market Crash 2012, Stock Split, Treasuries, Unemployment Claims

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