There is no doubt investors have been on a wild ride this August, with markets plummeting for six days straight, only to rebound a fair bit of losses, and now selling off some once again today. As markets struggle to digest the daily see-saw of news regarding trade and currency wars, the 10-year Treasury Bond yield has been punished, giving many experts concerns that a recession is near, while others feel that this storm may offer opportunities.
“There’s certainly a lot of uncertainty out there. I believe that the 10 year treasury is a very good gauge of fear, a far better gauge than for example the VIX. So it suggests that there are concerns out there. But it doesn’t necessarily mean that the market doesn’t also see opportunities. Because we’ve actually seen stocks hold up fairly well. So this could be an environment where, because yields are low, but there’s enough confidence in the economy, at least right now, that we see investors staying invested, perhaps moving to higher yielding parts of the yield-paying spectrum such as dividend paying stocks and perhaps emerging market debt,” Kristina Hopper of Invesco explained on CNBC.
While there are clearly concerns from stocks, gold, and bond yields that the market is weakening considerably, Jim Lowell of Adviser Investments believes that there are still opportunities to be taken advantage of if assets are relocated to foreign markets.
Lowell said, “So we absolutely see the warning signs from the bond market, the gold market, even the stock market itself sending a cautionary flag up the pole. But we think there’s select opportunities. Dividend growth stocks would absolutely agree with that, especially dividend growers. We also like the beleaguered healthcare sector on a selective basis. We’ve been shifting some assets from our large-cap international stakes into the small mid-cap names in the foreign and emerging marketplaces that have a lot less issues and concerns related to not just currency, but also to the tariffs and trade concerns that continue to be the driver of the near-term marketplace.”
Lowell acknowledges this period as one of uncertainty and news-driven fluctuations, but with longer term potential for investment.
“So long-term we think this is the kind of market that creates opportunities. Near term we absolutely understand that it’s the day-to-day event driven news that’s determining both the direction in the velocity of the volatility of the momentum,” Lowell added.
Investors who are hungry for yield can look to riskier debt options, such investment-grade corporate bond-focused fixed-income ETF options like the iShares Intermediate Credit Bond ETF (CIU), while stocks bulls could look into ETFs like the UltraPro Long S&P 500 ETF (UPRO) or the Direxion S&P 500 Bull 2x ETF (SPUU).
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