We are in the New Year and the Santa Claus rally was less than spectacular.
The various indexes climbed for three years in a row.
A fourth year of gains would be the first such stretch since 2007.
There have only been five such stretches.
I’m not discounting the ability of this market to move forward.
It appears the Federal Reserve will do its part to lower rates this year.
This will free up some cash held in interest-bearing accounts due to the low return.
The last short-term rate quoted to me was below 3%. With that in mind, investors will look to equities to increase that return.
One could simply buy into the Mag 7.
I cannot argue against any of those stocks.
I certainly would have you look at Alphabet (Google) and Amazon. Those two companies are almost monopolies in their fields.
Netflix and Nvidia are the absolute leaders in their sectors though competition is coming.
Once you get to Apple, Microsoft Meta (Facebook) and Tesla, the competition is even greater but appears manageable.
The only problem you will have is paying at the top.
If you look around for higher yield there are options.
There are bonds and, depending on the rating, you can get almost double the Fed Funds rate, but of course there is risk for that yield.
There are equities that pay dividends at or just above 3%, such as the energy stocks along with some financials.
These same stocks also have preferred shares that pay more yield but don’t rise as quickly as the straight stocks.
There are also Real Estate Investment Trusts (REIT) and Master Limited Partnerships (MLP).
In each case, the profits are passed through to the investor.
You should be aware that the investor will receive a K-1 instead of a 1099.
The K-1 is far more complex to reflect in your tax filing. You may give up the yield paying your tax preparer to complete your return.
I still am a fan of technology and keep looking for some of those that have not been touted so loudly such as Analog Devices and Qualcomm.
In the drug sector, one could look at Eli Lilly making money off GLP-1 weight-loss drugs. In each case though, there is significant competition.
I would be remiss if I didn’t mention precious metals and crypto.
I have some of both, but not nearly a proportion that would make that much of a difference much to my chagrin.
I will say that the drop in the value of the dollar due to amount of US debt is a real problem and I am not sure Congress or the Executive branch have the will to solve the problem.
We also face the same situation with health care and Social Security.
Politics always gets in the way as you don’t get elected asking your constituents to cut back.
The new year does seem set up for furh Having a mercurial Executive branch has its issues.
It is hard to factor in the possibilities or ramifications.
You would think that things have to settle down with the mid-terms coming in November, but the outcome could be more jarring.
As usual, one has to weigh the risks involved and come up with a strategy that fits their character.
It is great to brag about the windfalls, but it becomes crickets with the losses.
You can always fall back on the Wizard of Omaha, Warren Buffet, and just bet on the S&P 500 and ignore the noise.
