EC 2019 Theme Of “Slowing But Growing” Continues

If the Fed does, or does not, cut rates further in 2019, investors will still find it challenging to identify attractive, yield-based investment options for the foreseeable future. The bond market is also pushing fixed income yields lower (see chart below) for a variety of reasons while the rest of Wall Street waits to see what the Federal Reserve does next. As a result, certain other security types (Exs. equities and preferred securities) as well as certain sectors of equities (Exs. utilities and real estate) that are known for historically paying high relative yields are apparently becoming more attractive to certain income-oriented investors. In this regard, it is important to understand that the higher relative yields of some of these other asset classes and sectors may also come with more frequent daily price swings and higher potential risks of principal loss.

Daily Treasury Yield Curve

Source: U.S. Department of the Treasury, as of September 3, 2019.

Looking ahead, the two biggest uncertainties that we see on the near-term horizon are; 1) what the Fed will/will not do with respect to interest rates in their remaining two meetings of 2019 which are followed by press conferences in September and December, and 2) will additional tariffs between the U.S. and China be implemented? The potential outcomes of both of these uncertainties could result in more short-term periods of stock market volatility or additional longer-term growth potential for stocks or even a combination of both. As a result, building in some degree of diversification potential into overall investment portfolio strategies seems worthy of consideration.

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Disclosure: Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust® Unit ...

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