3 Stocks To Buy Now For Growth & Dividends To Counter Low Bond Yields

The Nasdaq jumped through afternoon trading Tuesday, as it tries to fight its way back after it tumbled 10% in just three sessions. Many of the tech names that helped drive the Nasdaq to new records appeared ready for a breather, from Tesla (TSLA - Free Report) to Apple (AAPL - Free Report), and the ultra-fast sell-off could help things look less volatile as we head into election uncertainty.  

The pullback wasn’t a total move out of tech. Instead, the institutions took home some profits on positions. Meanwhile, valuation worries and speculation about a bubble popping carry less weight when taking into account the current interest rate environment.

Don’t fight the Fed might come off as cliché. But it’s one of the primary reasons that the market has soared from its coronavirus lows in March. The Fed lowered its target rate to between 0 and 25 basis points in March, with Fed data putting the rate at 9 basis points right now, down from 160 bps or 1.60% in February and 2.3% in September 2019. And the Fed’s recent policy shift has effectively pinned the Fed Funds rate near zero for the foreseeable future.

Yields are historically low, even though they are up off their recent lows. The yield on the 10-year U.S. Treasury sits at 0.67%, down from 1.90% a year ago and 1.50% in February. This has real consequences for investors and helps magnify the TINA effect—there is no alternative—as the impact of inflation pushes real yields into negative territory.

Two things, all else being equal, move stocks: earnings and interest rates. And with rates at these levels, stock prices are likely to continue to go up, as will valuations, because future earnings are worth more given the lower discount rate. It is also worth noting that the S&P 500’s earnings outlook is heading in the right direction.

On top of that, pressure continues to mount on Congress to pass another stimulus bill ahead of the election. With all of this in mind, investors might want to consider buying stocks that also provide income via dividends.

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