Like a horror movie monster that just won’t die, COVID is making a comeback. I’m sorry to tell you, but mask requirements are returning in many health care facilities in the U.S. and around the world, amid a surge in respiratory illnesses such as the coronavirus and influenza.

The persistence of the pandemic remains a wildcard in the economic and financial outlook for 2024. Below, I’ll show you how to protect your portfolio from volatility and selloffs that could be caused by COVID’s redux. As I’ll explain, geopolitical uncertainty is another concern.

Each week, tens of thousands of people throughout the U.S. are getting admitted to hospitals with respiratory ailments. According to the U.S. Centers for Disease Control and Prevention (CDC), a growing number of Americans are surviving acute COVID infections only to succumb months later to health complications caused by “long” COVID. (I know it all seems like a bad dream, but it’s true.)

The emergence of new variants and the effectiveness of vaccination efforts will affect public health outcomes and, consequently, economic recovery. The health care sector, which played a crucial role in the early fight against the pandemic, is embracing new virus-fighting innovations (e.g., gene editing) that are attracting investor attention.

Biotech firms are editing DNA to not only combat COVID but also to treat and prevent diseases such as Alzheimer’s, Huntington’s, Parkinson’s, multiple sclerosis, sickle cell anemia, a wide range of cancers…just about any scourge you can think of.

Investors should monitor developments in pharmaceuticals, medical technology, and biotechnology. Breakthroughs in these areas can significantly influence market sentiment. The ability of countries to manage public health challenges will be a critical factor in determining the trajectory of the stock market in 2024.

The health care sector racked up a dismal performance in 2023, but health care equities have begun to rebound over the past few weeks. The sector should benefit this year from appealing valuations, advances in medical technology, and positive long-term demographic trends.

After a solid performance in 2023, the stock market faces new risks in 2024, and it’s not just from COVID.

Geopolitical tensions always have the potential to roil financial markets, and 2024 is shaping up to be a particularly turbulent year. Red Sea shipping disruptions, the Russia-Ukraine quagmire, bloody strife in Gaza, and the continuing rivalry between the U.S. and China can significantly sway market sentiment.

That said, we got some good economic news in the first week of 2024. The U.S. Bureau of Labor Statistics reported Friday that employers in December added 216,000 jobs for the month while the unemployment rate held at 3.7%. Those numbers compared with respective estimates of 170,000 and 3.8% (see chart).

December witnessed the lowest jobless rate in about half a century. To bolster the bullish narrative for health care, the hiring increase largely came from a gain of 52,000 in government jobs and another 38,000 in health care-related fields such as ambulatory health-care services and hospitals.

The report also showed that average hourly earnings rose 0.4% on the month and were up 4.1% from a year ago, both higher than the respective estimates of 0.3% and 3.9%.

The unexpectedly hot jobs report could delay the Federal Reserve’s interest rate cuts, but investors temporarily shrugged off the worry. The main U.S. stock market indices closed mostly higher Friday as follows:

• DJIA: +0.07%
• S&P 500: +0.18%
• NASDAQ: +0.09%
• Russell 2000: -0.34%

However, the indices finished lower for the week. U.S. bond yields continued to rise Friday, with the 10-year U.S. Treasury yield (TNX) up about 5 basis points to 4.04%. It’s been an inauspicious start to the new year, as investors grow less confident about the timing of rate cuts.

I still expect a strong stock market performance this year, but an unexpected crisis could derail the financial markets. Investors should remain vigilant and hedge their portfolios.

As a rule of thumb under current conditions, about 10% of your portfolio should entail a hedges sleeve. I define “hedges” as precious metals, real estate investment trusts (REITs), and commodities, among other investment classes. Your choices depend on your investment profile and how much risk you’re willing to shoulder.

In 2024, REITs are positioned to be among the best performing asset classes. The descent of interest rates is beneficial for REITs, because it lowers their borrowing costs and drives economic expansion.

Gold, the classic hedge against crises, should shine this year as well. The time to gain exposure to quality gold assets is now, before risks such as COVID and overseas war get even worse and the investment herd starts screaming buy buy buy! By then, you’ll be buying into a bubble.

Shocking Predictions for 2024

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John Persinos is the editorial director of Investing Daily.

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This article previously appeared on Investing Daily.