Recent weakness in global equity markets reflects the increasing risk of recession and growing realization that central banks’ ability to promote sustainable economic expansion through monetary policy has waned. Estimates from Wall Street’s hive mind have yet to reflect these realities.
What investors should expect over the coming months: Abrupt swings to the upside for the S&P 500 within the context of a bear-market correction, further downside in oil prices in the first quarter, weakness in the US economy and fewer rate hikes from the Federal Reserve.
The Federal Open Market Committee's October statement put the option of a potential rate hike back on the table for December. Although six years of extraordinarily accommodative monetary policy makes the Federal Reserve's first interest rate hike in nine years a big deal, all signs point to this tightening cycle occurring gradually and in a halting fashion. Investors shouldn't overlook this reality.
During the Federal Reserve’s last tightening cycle, dividend-paying equities struggled in anticipation of the central bank raising interest rates and outperformed once the Fed did the deed. Could a similar scenario play out this time around?
In April 2013, I left my job of 25 years as founding editor of Utility Forecaster to form my own publishing company and write the investment newsletter of my dreams: Conrad’s Utility Investor. The publication’s second birthday is as good a time as any to review where utility stocks have been and my outlook for where they’re headed.
Investors have sold utility stocks en masse, using concerns that rising interest rates will erode the value of future dividends as an excuse to take profits after last year’s rally. This is the pullback we’ve been waiting for, but there could be more downside in store. We highlight two high-quality names to buy now.
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