Did I Sense a Change in Market Tone Today?

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It would be foolish to believe that equity markets are going to turn around and race higher day after day for the next week or two, but today did seem to have a different ‘feel’ to it. There should be no mistake that the attitude and mood of buyers and sellers will affect prices and volatility on a day to day basis–less panic (less fear and greed). While domestic and global economic fundamentals will drive markets over the longer term it is important for consumer confidence to steady now that we are near ‘full value’ it is possible that we will stablize markets until firmer economic data is known.

Today the release of the FOMC beige book put a somewhat positive spin on domestic economic conditions which left a interest rate hike ‘on the table’ for September–the tone change that we detected was when the markets did not react violently to this information.  At this point in time we are not concerned with equities heading higher, we would simply like stocks and bonds to be relatively steady. Our portfolios have performed relatively well through the wildness in the last 10 days so we would be happy to simply get back to collecting our dividends and interest.

In conjunction with our sense of the change in tone today we again cut our hedge by 25%. Recall that we cut the hedge on Monday by 25% (just prior to the giant drop yesterday). We hope that we are correct in believing the volatility will be reduced in the weeks and months ahead—but we could be wrong.  Just ahead we have the employment report on Friday and on Thursday, September 17th we will have the FOMC meeting announcement. It also goes without saying that China could torpedo all thoughts and plans.

As we get through a few more trading days we will be looking at purchasing more shares of REIT Stag Industrial (ticker:STAG) and a small starter position of Realty Income (ticker:O).  An noted before Stag has a nice current yield of 8.01% now and we have been waiting for Realty Income to come down in price and up in yield to over 5%–and at 5.14% we think it is a buy.

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