Investors stepped in this week to do some value shopping, leading to the longest winning streak for the S&P 500 since last September.
The minutes from the December FOMC meeting were released on Wednesday, suggesting a more patient outlook for future interest rate increases. In fact, Fed funds futures are now pricing in just a 19.2% probability of an interest rate hike in 2019, compared with a 10.4% chance of a rate cut.
According to Bespoke Investment Group, energy names and other cyclical groups have been behind the market’s recent winning streak, which are precisely the names that were a drag in 2019.
Source: Bespoke Investment Group
History says that a positive U.S. market performance in January bodes well for the remainder of the year. In fact, stocks have finished the year higher 71% of the time, after posting gains in the first month of the year.
Government Shutdown Enters Fourth Week
The U.S. government shutdown is set to enter a fourth week, making it the longest in history, as President Trump and the U.S. Congress remain in a stalemate over $5.7 billion of funding for a 234-mile border wall. This week, the President publicly floated the idea of declaring the border situation a national emergency, to move around Congress.
In addition to federal workers starting to not receive paychecks, the effects of the shutdown may soon reach past our borders. On Thursday, President Trump cancelled his trip to the World Economic Forum in Switzerland next week, where it was thought that trade talks with China would continue.
Financial Dominate Earnings Calendar
In the meantime, the first full week of earnings season is upon us. According to CFRA Research, expectations are for S&P 500 earnings growth of 12.6% in the fourth quarter of 2018, declining to 6.1% for 2019.
The financial sector is in focus for quarterly reports next week, starting with Citigroup (C) on Monday. CFRA Research projects that financial names in the S&P 500 will post 23.3% year-over-year profit growth in the fourth quarter, but it will be important to note how the banks are gearing up for a flat-to-inverted yield curve heading into 2019.
Keep Focus on Growth With These 7 Stocks
With the recent rebound, U.S. stocks are up 10% from the intraday lows seen on Dec. 24. In situations like this, readers always ask: “is it still okay to buy now?”
At these moments, it’s important for investors to remember that whether stocks are up or down, the market always places a premium on growth.
A stable dividend of 5%, 6% or more is nice, but what investors really need to build wealth over time, is a dividend that management continues to raise year in and year out.
It may sound too good to be true, because growth investors and income investors don’t usually see eye to eye.
Income seekers want the security of 5%-plus annual dividend yields, while growth hounds think that cash should be reinvested back into the business– because a solid earnings report from Goldman Sachs (GS) or Wells Fargo (WFC) this week from can send the stocks up more than 5% in one day.
We’re here to tell you it’s possible to have the best of both investing worlds, and my colleague Brett Owens can show you how, with his simple (and safe) way to earn 12% a year from stocks with “hidden yields”.
At that rate, your money will double every six years, plus you can triple the retirement income that most dividend aristocrats or “safe” fixed income investments currently offer.
How do we accomplish this? Brett has discovered a key relationship between dividends and price gains that allow investors to find both growth and income in “hidden yields”.
Companies that consistently grow their dividends over time tend to outperform. The trick is the best dividend stocks almost never show high yields, because stock gains tends to track the size of dividend increases. If a company increases its dividend by 10% and the higher yield brings new buyers in, it often will send the price up and the yield back down toward where it started.
The hard part is finding the right investments to begin with and Brett has created a list of 7 stocks that offer such “hidden yields.” These companies provide a solid dividend today, with the potential to keep growing that payout over the next several years—regardless of the interest rate agenda of Chairman Powell and the FOMC. It’s easy to fixate on a stock’s dividend history or its current yield, but the real value lies in how much that payout can grow in the future.
What starts out as a 2%, 3% or 4% yield today grows each time a company raises its dividends. You could easily end up earning 10% or even 20% a year just from rising dividends … because your original amount of invested money never changes!
Source: Contrarian Outlook