NEW YORK (CNN/Money) – The Federal Reserve didn't cut interest rates on Tuesday but expressed concern about weakness in the economy. Just a few hours before the Fed's decision, President Bush declared that he was optimistic about the economy's prospects.

Yup, more than a year into the current slump and there's still as much uncertainty about how much worse it could get and how long it will last.

There are plenty of bulls that think the economy is on the road to recovery. (If you are in that camp, click here for a look at stocks and sectors you might want to buy now.) But if you think that a double-dip recession is unavoidable, then buying the stocks of industrial companies, banks and retailers is clearly not the way to go.

Bonds have been pockets of safety for skittish investors. But it hasn't been impossible to make money with stocks in this market. And fund managers that expect more pain in the economy and the overall stock market are continuing to follow strategies that have worked for them as of late.

Steve Lehman, portfolio manager of the Federated Market Opportunity fund, thinks the economy is heading for a double-dip recession, mainly because consumers and companies have taken on so much debt. "We had a classic bubble fueled by a credit finance binge. A big bust follows booms," Lehman says.

With that in mind, Lehman has about 21 percent of the fund's assets in cash. The fund, which opened in December, 2000, gained 15.7 percent in 2001 and is flat this year.

Still, Lehman is not totally bearish on stocks. He thinks real estate investment trusts (REITs) are good bets because of their low valuations and high dividend yields. (REITs pay most of their earnings to shareholders as a dividend in order to receive tax benefits)

His top pick in the REIT sector is Health Care Property Investors, which primarily owns properties of long-term care facilities and assisted living centers. The stock, which as of June 30, was the ninth largest holding in his fund, has a dividend yield of 7.8 percent and trades at just 11.5 times estimated funds from operations (FFO) for 2003. (FFO, the most commonly used measure of profitability in the real estate industry, is earnings plus depreciation and amortization expenses)

Bearish bets Six stocks that fund managers think will do well if the economy stays sluggish Company  P/E*  Long-Term Est EPS Growth Rate  Berkshire Hathaway  25.9  13.8%  Gold Fields  14  30.5%  Harmony Gold  10.4  34%  Health Care Property  11.5  5%  Newmont Mining  33.1  20%  Santos  9.7  NA   * Based on estimates for next fiscal year  Sources:  First Call, CNN/Money

Gold is another favorite investment of managers betting on a prolonged economic downturn. Because gold is a hard asset, gold stocks typically do well in times of economic uncertainty. To that end, precious metals funds are the top performing mutual fund category so far this year, with a 34.2 percent return according to Morningstar.

Peter Doyle, chief investment strategist of Kinetics Asset Management and co-manager of the Kinetics New Paradigm fund, says he's been buying more gold recently. He's not making a big bet but he thinks that concerns that the stocks have run up too much are not valid.

"This year's run doesn't counter the previous 21 year decline," Doyle says. As of June 30, Newmont Mining was his 15th largest holding. The fund, which was started at the beginning of 2000, is down 4.8 percent this year but returned 3.9 percent in 2000 and 2.1 percent in 2001.

And David Tice, manager of the Prudent Bear fund, says that gold stocks are among the few that he's making long bets on. Tice is a well known short-seller. Short sellers hope to profit from a stock's decline by borrowing shares, selling them immediately and buying them back after the stock has fallen. Tice says about 70 percent of his fund's assets are in short positions. That's a big reason why his fund is up 62 percent this year.

Tice thinks gold stocks will continue to do well because he believes the economy's woes are far from over and that the U.S. will fall into a double-dip recession, with the possibility of deflation even rearing its ugly head. "Recessions are required in order to cleanse the excesses of the market. Bear markets are required. It's like having a child and only having baseball games and ice cream," Tice says. Two top picks that he owns in the Prudent Bear fund are Gold Fields and Harmony Gold.

Lehman also likes gold, with about 6 percent of his fund in gold stocks. But outside of gold and real estate, he says he has been increasingly looking abroad for investment opportunities. Approximately 20 percent of his fund's assets are in foreign stocks.

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Santos, Australia's largest producer of natural gas, is Lehman's biggest international bet. As of June 30, Santos was the third largest holding in his fund. The company has much less debt than its counterparts, with a long-term debt to equity ratio of 34% compared to an average of 99% for the natural gas industry as a whole. "I can find more companies overseas with superior balance sheets," Lehman says.

And of course, emulating Warren Buffet in these volatile times might not be a bad idea, says Doyle. To that end, the Class B shares of Buffet's Berkshire Hathaway (which trade for only about $2400 as opposed to the $73000 price tag on the class A shares) are the fifth largest holding in his fund. And Wesco Financial, an insurance, furniture and steel company that is 80 percent owned by Berkshire Hathaway, is Doyle's fourth largest holding.

"In this market, we're focusing on companies with incredible financial strength," Doyle says. Berkshire Hathaway has $7.3 billion in cash and no long-term debt.