Displaying items by tag: yields

Monday, 17 September 2018 09:43

What You Need to Know About an Inverted Yield Curve

(New York)
There has been a lot of doom and gloom about the risks of an inverted yield curve lately. An inverted curve is often seen as the best and most reliable indicator of recession, as it has accurately preceded the last several US recessions. Some are saying this time may be different as market conditions and central bank created stimulus have warped markets. Well, despite the fact that many hate the “this time will be different” mantra, it may actually be true in this case. In particular, the inverted yield curve has only been reliable in the US, whereas in Japan and the UK it is not a good indicator. This means the indicator is by no means universal, and gives weight to the idea that an inversion does not necessarily mean a recession is coming.


FINSUM: The Japanese example is particularly interesting to us as the BOJ has long had extraordinarily accommodative monetary policy. In that sense it may be the best case study for how an inversion could play out this time.

Published in Bonds: Total Market
Monday, 17 September 2018 09:42

The Best ETFs for Rising Rates

(New York)

Rising rates are upon us. The economy is red hot and a Fed rate hike is imminent, with another likely coming in December. This puts many sectors and stocks at risk. So what are the best sectors and ETFs to invest in right now? Three sectors that stand to benefit are financials, technology, and consumer discretionary, so buying stocks and ETFs there appears a good bet. For technology, Invesco has a momentum focused fund for tech leaders called the DWA Technology Momentum ETF (PTF) which seems interesting. In consumer discretionary, the SPDR Consumer Discretionary Select Sector Fund (XLY) gives good coverage.


FINSUM: All of these bets are cyclical (meaning the sectors benefit because the economy is strengthening when rates rise, which boost consumer spending). Banks are a little bit more compelling to us though, as they benefit from an improved economy, but they also directly gain from rising rates through a better net interest margin.

Published in Eq: Large Cap
Monday, 17 September 2018 09:41

The Best Undervalued REITs

(New York)

REITs are a tough area to invest in right now. On the one hand they look vulnerable because of the rising rate environment, but they have also surged recently at the same time as offering enticing dividends for investors. The answer, then, may be to find undervalued REITs, and Barron’s has put out an article helping to do just that. Here are some REITs the publication highlights: Invitation Homes, Front Yard Residential, Digital Realty Trust, InterXion Holding, LaSalle Hotel Properties, and Extended Stay America.


FINSUM: REITs tend to have very good dividends, but tend to suffer during periods of rising rates because of this. They seem like a good source of income right now, but need to be chosen very carefully.

Published in Eq: Large Cap
Friday, 14 September 2018 09:22

3 Stable and Rewarding Dividend Stocks

(New York)

The truth is that most everyone loves dividend stocks. Nowhere is that statement more true than among the US’ retirees, who have a major reliance on dividend income for their everyday expenses. Thus, here are three stable dividend stocks that investors should consider: Scotts Miracle-Gro (~3%), IBM (4.3%), and AT&T. The latter two are well-understood and have strong market positions, with AT&T essentially benefitting from an oligopoly. Miracle-Gro is an interesting choice as it has a good underlying business, but has been hammered this year by a handful of short-term issues, but thus offers a good chance at price growth and a solid dividend.


FINSUM: IBM is almost in the dividend aristocrat club, having raised its payout 23 years in a row. AT&T looks quite stable too.

Published in Eq: Large Cap
Friday, 14 September 2018 09:15

Combat Rate Risk with this ETF

(New York)

Rates look to be rising quickly. The economy is red hot and the Fed is hawkish, meaning two more rate hikes this year look very likely. With that in mind, investors need to protect themselves from rate risk. That means a lot of sources of income, like dividends stocks and bonds, could become sources of losses. However, fortunately there are numerous ETFs that can help investors earn income while protecting against losses. One such is Pimco’s 0-5 Year High Yield Corporate Bond (HYS). The ETF has a yield approaching 5% and has a duration of just over 2 years, putting it in the low duration category (meaning it has low rate risk).


FINSUM: This seems like a good option if you want to earn high rate-protected income. Given the current rate environment, funds like these should probably be a fixture of most portfolios.

Published in Bonds: Total Market
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