Displaying items by tag: utilities

Monday, 15 October 2018 09:30

The Winners and Losers in Rising Rates

(New York)

Whether investors like it or not, the market seems to have finally come to grips with the reality of higher rates. That realization has started to change the performance of different assets from even a week ago. So who will win and who will lose? On the positive side, financials and banks seem likely to benefit, as they make a great deal of their income from interest. Energy and materials stock are likely to shine as well as they benefit from the expanding economy. On the losing side will be utilities, housing, and autos stocks, all of which are sensitive to higher rates in their own ways. No one can be sure how tech might respond, as the sector is young enough that there is not good evidence to say how it might react.


FINSUM: The business case for how most sectors will be impacted by higher rates is clear. If only share performance were so simple.

Published in Eq: Total Market
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
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
Thursday, 13 September 2018 09:17

Higher Rates Will Hurt These High-Yield Sectors

(New York)

The Fed seems almost certain to hike later this month, as well as in December. Rates heading higher looks like a certainty. So what does that mean for high yielding equity sectors which many Americans rely on for dividend income? The answer is a mixed picture. Pure rate-driven sectors like utilities, real estate, and telecoms will likely be hurt, but high-yielders like healthcare and and consumer staples should hold up better because their businesses can generate a lot of cash that can be returned to shareholders via dividends and buybacks.


FINSUM: Pharma has returned over 12% this year while real estate is just around 2%, showing how the former can outperform in rising rate environments.

Published in Eq: Large Cap
Thursday, 12 July 2018 10:12

Take Another Look at These Dividend Payers

(New York)

If there was one subset of stocks that looks deeply out of style right now, it has to be utilities. Back a few years ago, they were immensely hot as the stock market’s bond substitutes in an insanely low-yield era. Now, you can earn almost 2% on a short-term Treasury bond. However, it might be time to take another look at the sector. Most utilities are yielding about 3.3%, and have been supported over the last few weeks by the fact that bond yields have stopped rising. The sector’s stock prices have fallen just short of 10% since last September, but that means valuations look attractive, as do yields.


FINSUM: If you think yields won’t climb that much further—which we don’t, at least in the short to medium term—then utilities do seem like a good-yielding bargain.

Published in Eq: Large Cap
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