Displaying items by tag: rates

Thursday, 04 October 2018 09:55

Dividend Stocks are Getting Hammered

(New York)

The biggest dividend sectors, such as utilities and REITs, are getting hammered alongside the selloff in bonds. With treasury yields surging on Wednesday, utilities and REITs fell as much as bond prices. Dividend stocks had been experiencing a month of strong performance, but fears have been rising since the last Fed meeting, when the central bank took on a decidedly more hawkish tone.


FINSUM: We are concerned for dividend stocks right now because we think the big move higher in yields might have reset the market’s thresholds. Is the next stop 3.5% on the 10-year?

Published in Eq: Dividends
Wednesday, 03 October 2018 11:05

Fight Rising Rates with This ETF

(New York)

Rates are rising, and with it, investors need to take a closer look at their portfolios. Rising rates can have serious effects on some dividend-focused sectors, such as utilities, REITs, or consumer discretionary, and most bonds. With that in mind, here is an ETF to help combat rising rates. One fixed income ETF built for the current rate environment is the iShares Interest Rate Hedged Corp Bd ETF (LQDH). What makes this ETF special versus others is that it is actively managed and has longer-term fixed income exposures, which stands in sharp contrast to the mostly short-term bonds these funds typically hold. It holds a 3.62% yield and charges 0.24% per year.


FINSUM: That seems a good expense ratio and yield given that this is an actively managed fund. Interest rate hedged ETFs seem like a good idea right now given the strong economy and increasingly hawkish Fed.

Published in Bonds: Total Market
Wednesday, 03 October 2018 11:01

Don’t Quit on Dividend Stocks

(New York)

Dividend stocks may have done well over the last month, but generally speaking, the last decade has been bleak. With the exception of a few months and quarters, dividend stocks have been largely out of favor with investors, who have instead devoted their capital to quick-growing growth stocks, especially in the tech sector. That said, the next year may be very good for good dividend payers, as yields are attractive and payouts are growing quickly. According to one portfolio manager in the space, “We are getting those yields and dividend growth—this is going to be a very good year for dividend growth—from the usual suspects”.


FINSUM: This seems like a risky bet to us. While dividend stocks have a place in the portfolio, the risk of rate rises to dividend sectors is considerable.

Published in Eq: Dividends
Monday, 01 October 2018 10:47

The Fed Might Take a Very Hawkish Turn

(Washington)

The Fed has hiked rates many times over the last couple of years, but the overall attitude of Fed officials has been very relaxed. They have been diligent to project a very mild outlook of rate hikes. However, that may be set to change, argues the Financial Times. The US economy is growing very strongly, and the odds that the Fed may have to adopt a much more hawkish position are growing. The Fed’s hikes, though frequent, have been small, meaning policy is still accommodative and pro-growth. However, given the state of the expansion, a sharp move higher in rates is looking increasingly necessary.


FINSUM: Given the Fed’s most recent statement, this argument carries some weight. We can see Powell and the team getting more hawkish. That said, the economic tailwind of tax changes is fading, so perhaps it won’t be necessary.

Published in Macro
Monday, 01 October 2018 10:46

How to Adjust Your Portfolio for Rising Rates

(New York)

Rates are rising and new statements out of the Fed make it seem like the central bank could become more aggressive with its hike. With that in mind, the Wall Street Journal thinks it is time to adjust portfolios to account for a hawkish Fed. The biggest recommendation that the WSJ makes is that investors in retirement should keep a healthy allocation to stocks. Even though rates are rising, yields may not get high enough quickly enough to provide good returns. Accordingly, keeping a solid portion of capital in equity seems smart, but don’t swing for the fences. Next, make sure to stay very diversified to mitigate risks, and particularly, beware rate sensitive sectors like utilities or REITs.


FINSUM: This is sound advice, though nothing that would not be second nature for an advisor.

Published in Bonds: Total Market
Page 93 of 120

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