A Taste of Things to Come?
By: Tim McPartland,
With the DJIA off 230 points at this moment based upon a spike in interest rates created by Fed speak one wonders if they should be buying now. Â Eric Rosengren, who has been fairly dovish and lobbying for low interest rates has now changed his tune. Â In typical Wall Street fashion the markets have reacted fairly swiftly and yield stocks (utilities, REITs, MLPs, preferreds and baby bonds) are being hammered pretty hard. REITs are off 3% thus far, while utilities are off 2%. Â Many preferreds and baby bonds are off 1-2%.
We are always looking for bargains as we have mentioned many times, but drops of 1-3% are hardly bargains given the level that yield stocks were trading at. Â For the nimble trader types there is likely a chance for picking up some issues to quickly “flip”, given that the market will likely spring back in the days ahead. Â For the buy and hold types (like us) when we look for bargains we are looking for drops of 5, 10 or even 20% so we will likely be waiting for some time before these prices are seen. Â The bottom line is we are not really buyers on this minor pullback.
Today does give us a flavor of possible things to come. Â If there was a rate increase by the Fed later this month I think we would be looking at a real setback in yield stocks as there is not any conviction by market players that rates will be increased before December if even then.