![]() ![]() That factor is the BLS’ yearly adjustment to the CPI’s health insurance component. For more great income ideas, click here for our latest report “ Indestructible Income: 5 Bargain Funds with Safe 7.5% Dividends.While I would want to see this repeated for another month or two to confirm such a significant potential shift, there is one VERY important factor to note which helped to drive this deceleration - importantly, we also KNOW that this will continue to support lower services prices over the next year. Michael Foster is the Lead Research Analyst for Contrarian Outlook. Throw in the discount and the 7% dividend and it’s pretty easy to see why this fund is nicely suited to today’s market. That, in turn, gives the fund more of its return in cash, which helps stabilize its portfolio and supports its 7% dividend.įinally, because BXMX holds the stocks in the S&P 500, you’re getting exposure to the companies least likely to be affected by geopolitical events, like Apple (AAPL), Microsoft (MSFT) and Berkshire Hathaway (BRK.A). It gets to keep the fees (called “premiums” in option-speak) that it charges investors who buy these options, no matter what happens. So what about that volatility-reducing strategy I mentioned a second ago? That would be the fact that BXMX sells covered-call options-contracts under which it charges investors for the right to buy its stocks at a higher price in the future. And we can do it while hedging against uncertainty (and giving ourselves that double discount I mentioned earlier) with Nuveen S&P 500 Buy-Write Income Fund (BXMX), which yields 7% today and is cheap, too. That makes now a good time to buy US stocks, while they’re still attractively priced after the recent selloff. And that’s leading them to American stocks, which already have a long history of outperforming their European cousins. One of the war’s effects on the investment side is that more people around the world are looking for stocks and funds that aren’t closely tied to the volatile situation in Eastern Europe. This is obviously a tremendous humanitarian crisis first and foremost, with plenty of reason to be concerned about the well-being of the three million (and counting) refugees throughout Europe, as well as the brave soldiers fighting in the country. The Fed knows this, and realizes it needs to keep rates relatively low, even as it hikes them.įinally, the big one: the war in Ukraine. ![]() That gives us a hint that 2019’s rate is a reasonable place for rates to peak this time around, while the peaks in 20 were unsustainably high, particularly when you consider today’s higher consumer, corporate and government debt. And while 2.75% is slightly higher than where we peaked in 2019, it’s far lower than the peak in 2006 (5.25%) or 2000 (6.5%). If rates hit 2% by the end of this year, they’d still be way below where they were in 2018. History gives us another reason why this forecast is aggressive. Lower inflation would give the Fed a reason to ease up on rate hikes, making it less likely we’ll see its plan to raise rates to 2% by the end of 2022 and 2.75% by the end of 2023 come to fruition. That’s a healthier, more balanced situation than we’re seeing now, which is all the more reason to buy stocks today (and doing so through a CEF trading at a discount to net asset value, like the one we’ll talk about in a second, gets you two discounts: one due to the discount and the other as a result of the recent market pullback). This points to lower inflation going forward, with still-robust profits and sales for US firms as supply-chain problems ease. As the old saying goes, “The cure for high prices is high prices.” ![]() But more people are now saying they’re cutting discretionary spending in response to higher prices, which means there’s not much runway left for companies to keep using this strategy. ![]() That suggests that some companies are taking advantage of inflation to hike their prices more than necessary. S&P 500 Earnings & Revenue Growth FactSet ![]()
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