Last week’s market thumping may be flashing a significant message: Record $60-a-barrel oil threatens the vigor of both the economy and corporate earnings. In turn, that cries out for a reality check of your portfolio, unless you’re ready to stumble as badly as the New York Yankees and Mike Tyson.

In other words, instead of plunking down money on the next hot stock tip, get your portfolio in order so it can survive an increasingly jittery market environment in which the Dow got slammed for a 3% loss last week – roughly 300 points on Thursday and Friday alone.

The president of Core Asset Management, Jack Mayberry, tells me any reality check of a portfolio should factor in the following:

* We’re in for a lackluster 2005, with stock prices at year-end likely to be in a range of plus or minus 5% from where they are now.

* We’re in an era of hard assets and dollar depreciation, and portfolios should reflect it.

* Interest rates are headed higher.

* Energy stocks, despite their big gains the last two and a half years, are still the place to be.

Contrary to general thinking, Mr. Mayberry views interest rates as abnormally low, given what he sees as growing inflationary pressures and Alan Greenspan’s contention that the economy is reasonably strong. As such, he thinks it likely that rates, both short- and long-term, are headed higher, with 10-year Treasury notes, now around 3.9%, likely to reach 5% by year-end, and short-term rates (the federal funds rate) apt to rise from 3% to 4% or more.

If he’s right, said Mr. Mayberry, whose 26-year-old New York-based investment firm manages $70 million in assets for high net-worth individuals, the likely direction of stock prices is down.

Reflecting this worrisome view, about 90% of the firm’s assets are invested in exchange-traded and mutual funds (stocks and bonds), versus individual stocks, with a significant amount in non-dollar assets. This reflects Mr. Mayberry’s belief that this year’s dollar rally will run out of steam in the face of a worsening and unsustainable account deficit. “I want foreign currency exposure,” he said.

So how does the firm – whose clients are up about 2% to 4% this year after posting roughly 12% to 14% gains in 2004 – cope with Mr. Mayberry’s expected dreary 2005 market?

For starters, our worrywart has invested about 25% of his firm’s assets in foreign bonds, notably Asian and euro-denominated bonds, as well as TIPS (Treasury inflation-protected securities).

As part of his enthusiasm for hard assets – which Mr. Mayberry believes are two to three years into a bullish trend that could last about 10 years – another 10% of his firm’s portfolio is in an unleveraged basket of commodities, namely funds that embrace both agricultural and industrial commodities. His rationale: The risk is lower in hard assets because of favorable pricing trends, increasing global demand for commodities, especially from China, and his anticipation of renewed weakness in the greenback.

A favorite in the hard-assets category are energy stocks, which, along with utilities, make up another 15% of Core Asset’s portfolio. Despite their big gains the past few years, Mr. Mayberry rates energy stocks as undervalued. Oil stocks, he said, currently reflect oil prices under $40 a barrel. But even if oil were to dip below $40, energy stocks, he believes, should still go higher.

Why? Because he expects the price of oil generally to remain above $40 a barrel. He attributes this forecast to rising demand in the face of supply constraints; potential political problems in such countries as Iraq, Saudi Arabia, and Venezuela; possible supply disruptions from terrorist activity; and the fact that any substantial new production is at least several years away.

In the case of utilities, money has been pouring into the sector from investors seeking income – a trend Mr. Mayberry sees continuing at a brisk pace. On average, utility dividends run 3% to 4%, which the manager views as attractive in a low interest rate environment. Likewise, he notes, utility dividend payouts are being taxed at lower rates because of changes in the tax laws. Yet another plus: Utilities are increasing their rate of profit growth through higher energy costs.

As far as industry groups go, Mr. Mayberry is particularly partial to the pharmaceutical sector, whose stocks, he points out, despite some recent recovery, are still relatively low-priced after last year’s drubbing stemming from well-publicized problems at such biggies as Merck and Pfizer. His favorite drug plays are two exchange-traded funds listed on the Big Board, one domestic and one foreign, that trade under the symbols XLD and IXJ.