Two weeks ago, we highlighted a scenario in which patient investors would have an opportunity to pick up high-quality, dividend-paying stocks at low price. (See Taking Advantage of the Market’s Irrational Fears.)
Since then, the mining and energy-related picks in our Lifelong Income Portfolio have pulled back significantly, raising two important questions:
This recent selloff has nothing to do with rising interest rates, a risk factor that has been on many investors’ minds.
In fact, the yield on the 10-year Treasury note slipped as low as 1.868 percent this month, while investment-grade bonds continue to offer yields to maturity that are near generational lows.
Junk-rated debt, on the other hand, has come under selling pressure because of concerns about softness in the global economy.
For example, Northeast Investors Trust (NTHEX, 800-225-6704)—a mutual fund that specializes in high-yield debt—is still up on the year, but has given up about 3 percent of its value since raising its Aug. 20 payout.
Commodity producers have lost ground amid concerns about weakening demand in Europe and Asia at a time when supplies continue to grow.