Knowing the ins and outs of what’s happening in investments, is something everybody should keep up to date on. If you’re the kind of person that would like to stay financially responsible, then it’s really important to keep your eye on the current markets. There is simply no excuse for not knowing these things…
We’re now well into 2016, and this year will see investors having to contend with heightened volatility as the Federal Reserve Board nudges interest rates toward more-normal levels, the unparalleled election-year circus, and economic growth both in the US and internationally with it’s starts and stops. Corporate profits will grow slowly, and price-earnings ratios (how much investors are willing to pay for each dollar a company earns) are doubtful to grow.
Many experts are betting on closed-end bond funds, financial and energy stocks. But, many are bearish (Investors who believe that a stock price will decline) on long-term treasury bonds and biotechnology stocks. Analysts are 50/50 over junk bonds.
"Following the 3rd-quarter sell-off, a number of closed-end bond funds with solid assets are selling at unusually deep discounts," says Martin Fridson, chief investment officer at wealth management firm Lehmann Livian Fridson Advisors. He personally prefers those funds with high-yield and investment-grade bonds. An example of this being the BlackRock Credit Allocation fund. Like many other funds it uses leverage (borrowed money), which can boost returns when interest rates are low, but on the other hand it can depress returns when rates are higher.
Dividend stocks won't completely shield you from downturns, so please don’t see them as somehow replacing the fixed-income part of your portfolio. Of course, they have historically done quite a good job at reducing any volatility.
One area that was really negatively effected in 2015 was retail. The S&P Retail ETF slumped nearly 10% due to many retailers suffering weak sales on top of falling profits. With the sustained growth of ecommerce added to worries about shrinking consumer spending, many retail stocks fell.
All of this has helped to push prices down, and lead to shares of good companies selling at very low prices. But beware: Many retailers are facing issues that are that are forecast to last for quite some time.
Two stocks, Best Buy and Kohl's, are looking to be really fool-proof places to invest in 2016.
They have both kept costs low, spending less than competitors, and in Best Buy’s case, by more than $1 billion.
It’s almost a foregone conclusion that the Federal Reserve will raise interest rates next year, so financial stocks as a result will become more attractive.
An increase in rates in 2016 will also allow banks to earn more on their loans. But, banks are generally able to fall behind the Fed in raising rates for depositors, banks' interest margins should therefore increase. Treasury bonds are not a good place to allocate capital, as bond yields will need to get higher. When yields get higher, bond prices fall.