There's still a lot of cash waiting to make the move from bonds back into stocks.
How to Bet With the Fed
Want to bet with the Fed in 2013? The simple answer is dividend stocks.
High-quality dividend payers are continuing to outperform this year, buoyed by this continued low-rate environment and driven by record corporate cash and profitability. In short, large-cap U.S. stocks have the wherewithal to generate yield for investors in a market where that's still extremely hard to come by. So far, those yields have largely kept up with price appreciation in stocks because fundamentals have moved with stock prices in lock step.
I'd expect those yields to erode (thanks to price increasing, not dividends dropping) just before we see a meaningful rotation away from fixed income.
At the same time, index funds such as the
SPDR S&P 500 ETF
PowerShares QQQ Trust
should continue to show investors strong performance in 2013. The liquidity-driven rally promulgated by the Fed isn't just putting a floor in treasuries; it's also been supremely effective at shoving stocks higher.
The bottom line is this: You can disagree with what the Fed's doing. You can argue that the dollar is doomed or that we're months away from hyperinflation. But you can't fight the Fed and expect to make money in this market.
As Ned Davis is famous for saying, There's a difference between being 'right' and making money."
And investors who want to make money should still buy stocks.
-- Written by Jonas Elmerraji in Baltimore.
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