3 Retirement Ideas For Recurring Income

Money, Profit, Finance, Business, Return, Yield

We are long-term investors focused on building a retirement portfolio that provides recurrent high income in both good and bad times. We also seek to identify the macro-trends and invest in areas that are likely to outperform for long-term capital gains.

While many value stocks have started to rally since October 2020, the equity markets, in general, remain cheap. Remember that the best indicators for stock valuations are:

1) Their relative valuations to interest rates (i.e., the 10-year Treasury yields). Based on this factor alone, stocks are not expensive.

2) Importantly, the liquidity available in the markets. Today the world is awash with liquidity. It is estimated that there remains $6 trillion of cash sitting on the sidelines in CDs, bank deposits, and money markets, earning next to nothing. These excess funds are starting to slowly rotate into equities.

3) Another interesting factor is that the long-bull market in bonds is suddenly over; those who have been holding long-term treasuries such as the 10-year or the 20-year Treasury Notes have been seeing large losses as long-term interest rates start to creep up. We are seeing investors dumping treasuries in favor of equities, and these dollar amounts are enormous.

4) Last but not least, more liquidity is being injected into the system by the new administration, with $1.9 trillion in new stimulus and other new stimulus and infrastructure spending planned for the year 2021. 

At the end of the day, it is liquidity that is the ultimate driver for equities, and we are swimming with it. Today we are in a strong secular bull market, and investors should not be surprised to see the markets keep going higher. This setup above opens the door for one of the best market rallies that are likely to happen over the next two years.

What We Are Buying Today

While we are likely to see some short-term consolidation as the markets digest the recent gains and build up momentum to move higher, the medium and longer-term picture looks very bright.  So what are we buying today?

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