December is the year end and in the stock market, there are 2 aspects to that year end. One is tax loss selling or possibly reducing your portfolio by selling the losers and using the deductions against the capital gains on the winners. In the investment bank world, December is when the bonus is paid and people look to the next year. What will 2021 look like?
Given the vaccine, we all hope 2021 will look more like 2019 than 2020 with the rise of hospitality and tourism in the economy. We hope people can gather in large crowds to celebrate concerts or sporting events or events celebrating the country. In the broad outlook, the issue is always what do you think will happen to interest rates and where will they be at the end of the year? If interest rates rose to above 5%, that would be great for savers, invest your money to receive 5% worry free, but not good for the economy. In all likelihood interest rates are going to closer to where they are till summer, then maybe the economy will be opened up. As long as rates are low, dividend paying stocks are a very good investment.
In a article by Scott Barlow – he notes Merrill Lynch’s Bob Farrell’s 10 Rules of Investing includes the warning When all the experts and forecasts agree – something else is going to happen.
At the moment many forecasts are similar, Mr. Barlow mentions some of the forecasts he enjoys reading include: Michael Wilson and Andrew Sheets at Morgan Stanley, Savita Subramanian from B of A Securities, David Kostin of Goldman Sachs. Mr. Barlow says he reads them to identify underlying market trends such as value vs growth stock performance and the effects of rising bond yields on dividend paying equity sectors.
As far as changing his portfolio to do market timing, never. Why? if the predicted trend arises and asset values increase, there is usually plenty of time to put that knowledge to work through actual market transactions.
Linking to dividend paying stocks, one of the reasons you buy them is time is on your side. As long as the company is profitable and can pay its dividend, then you do not have to be a hurry to get on track with the latest trends. The bulk of your portfolio is long term invested and you do not have to make a change every week. Follow the trends, listen to what people are saying but take your time for patience in long term investing in good companies is a good thing.
There are more questions than answers, till the next time – to raising questions.