Given uncertainties, maybe best to plant in dividend growers
Main U.S. indexes edge down ahead of FOMC decision
S&P 500 sectors mixed, changes modest
Dollar, gold ~flat; crude dips; bitcoin off ~1%
U.S. 10-Year Treasury yield rises to ~3.69%
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GIVEN UNCERTAINTIES, MAYBE BEST TO PLANT IN DIVIDEND GROWERS
Equity markets have been choppy lately and given worries over economic growth and heightened political uncertainty ahead of the U.S. elections, Saira Malik, CIO at Nuveen, is expecting volatility to remain elevated.
And even though the market is expecting the Fed to cut rates for the first time this cycle later today, Nuveen says economic growth is likely to continue to slow.
"This backdrop favors defensive equities, especially dividend growers, which offer more attractive valuations and have historically been less volatile relative to the overall stock market," writes Malik in a note.
She adds that many portfolios are overweight U.S. large-cap growth equities, which, admittedly, has been a winning strategy over the past decade. Recently, however, she says that strata of the market has tended to sell off and underperform dividend growers as stocks have been spooked by weak economic data.
Meanwhile, Malik says though inflation has moderated, it remains above the Federal Reserve’s 2% target.
"A further downward trajectory may not be smooth, and it will take time for inflation to fully normalize. The combination of capital flexibility and balance sheet strength that dividend growth companies enjoy should help them mitigate inflationary input cost pressures, and thereby maintain or even expand profit margins – ultimately a plus for shareholders," she writes.
In Malik's view, the potential combination of attractive risk-adjusted returns and lower volatility makes dividend growers a wise choice for a core portfolio allocation.
(Terence Gabriel)
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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:
FORMER FED TRADER SEES 25 BP RATE CUT - CLICK HERE
AMID LAST WEEK'S BIG GAINS, BOFA CLIENTS WERE SMALL NET SELLERS - CLICK HERE
DISTRESSED DEBT PERFORMANCE TO IMPROVE, ALTERNATIVE ASSETS TO CROSS $30 TRLN BY 2030 - PREQIN - CLICK HERE
GETTING THE HOUSE IN ORDER: HOUSING STARTS/PERMITS, MORTGAGE DEMAND - CLICK HERE
WALL STREET STALLS AT STARTING LINE AS INVESTORS HOLD THEIR BREATH FOR FED - CLICK HERE
MOMENTUM OUT FRONT, BUT IS THERE A SHIFT AFOOT? - CLICK HERE
THE UNBEARABLE WRONG-NESS OF FED WATCHING - CLICK HERE
SOFT LANDING TO BENEFIT GROWTH STOCK LAGGARDS - UBS CIO - CLICK HERE
WHAT NEXT AFTER THE FIRST FED CUT? - CLICK HERE
ALL GOOD FOR EURO AREA LIQUIDITY… FOR NOW - CLICK HERE
NOVO WEIGHS, AWAITING THE FED - CLICK HERE
EUROPE BEFORE THE BELL: THE FED, MIDDLE EAST AND UK CPI - CLICK HERE
TRADERS STILL GUESSING IN FINAL FED COUNTDOWN - CLICK HERE
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