Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
|
|
|
Published: January 17, 2005
A combination of profit-taking and renewed interest rate jitters
moved the market into negative territory during the first two weeks of
the year.
After the run up in share prices following the November 2nd election, it
looks like large institutions (pension funds, mutual funds, hedge funds)
have now decided to nail down their profits. Specifically, portfolio
managers have spent the first few weeks of the year selling off the
volatile technology and small-cap stocks that had exploded higher during
the year-end rally.
The published minutes of the Federal Reserve's December meeting on
interest rate policy also put the markets on high alert. The minutes
revealed that some Fed members fretted about inflation and even
considered removing the word "measured" to describe the
anticipated slow and steady pace of future rate hikes.
The Fed has used the word "measured" to describe the likely
pace of future rate hikes often throughout the past year, and investors
feared that a change in policy here could signal an era of rapidly
rising interest rates, which would weigh on corporate earnings and drag
down share prices. However, a closer reading of the minutes suggests the
markets may have overreacted, since the minutes also indicated most Fed
members expected inflation to remain low.
The S&P 500 Index (^GSPC, 1184.52) fell -2% in the first two weeks
of volatile trading action. Dividend-paying stocks, as measured by the
newly expanded Dow Jones Select Dividend Index (^DJJ, 697.90), followed
the S&P 500 into negative territory and are now down -3% in the
year-to-date period.
REITs, which last year posted almost three times the gains of the
broad-based S&P 500, also came under selling pressure. The benchmark
Morgan Stanley REIT Index (^RMS, which we will now be tracking in lieu
of the smaller Dow Jones Equity REIT Index) plunged -4% after the
Federal Reserve's inflation concerns were made public. That was the
sharpest one-day drop the index has seen since last April. RMS closed
Friday, January 14th at 722.28, down -6% since the start of the year.
The steep decline may present entry opportunities for select REITs, some
of which should be nicely cushioned from rising interest rates. In
forthcoming issues of our High-Yield Investing newsletter we will
keep readers abreast of our latest findings in this high-yielding corner
of the market.
OUTLOOK
The big question is whether the latest downturn in stocks represents
a short-term correction or a longer-term trend.
Historically, the market has an equal probability of going either higher
or lower. Of the 20 times in the past 75 years when the market closed
down the first week of the year, the market ended the year lower 10
times and higher 10 times, according to Stock Trader's Almanac.
Looking ahead, the Federal Reserve is widely expected to raise
short-term interest rates another 25 basis points (0.25%) at their next
policy-setting meeting on February 2nd. At this point it remains to be
seen whether the Fed will also signal that future rate hikes could be
faster and larger than originally expected. Such a move appears unlikely
given the host of conflicting economic reports in recent weeks, as well
as current projections for an economic slowdown in 2005.
As earnings season moves into full swing, fourth-quarter 2004 earnings
reports and corporate outlooks for 2005 will drive the markets
throughout the next few weeks. S&P 500 companies are still expected
to report healthy +15% to +18% growth in fourth-quarter earnings. And
even though earnings growth is expected to slow to a single-digit pace
in 2005, that still leaves room for stock prices to rise.
Whatever direction the market takes in the near-term, we fully expect to
see continued volatility in the coming year. Given the mix of unclear
economic news, unstable oil prices and an uncertain U.S. dollar, going
forward we likely will see a repeat of the roller coaster pullbacks and
short-lived rallies of 2004.
Long-term income investors should have no trouble taking the market's
ups and downs in stride. Although the S&P 500 may take one step
backward for every two steps forward, nevertheless, for reasons we
described in our January issue of High-Yield Investing, we
believe the index will end the year about +8% ahead of 2004 -- and +10%
ahead when you include the impact of dividends.
Judging by the opening weeks of trading, large-cap stocks, many of which
pay dividends, are on track to outperform small-caps this year. While
the S&P 500 Index of the 500 largest stocks trading on U.S.
exchanges has lost just -2% so far this year, the Russell 2000 Index
(^RUT, 617.48) of the 2,000 smallest publicly traded U.S. companies has
already given back more than -5%. It appears institutional investors
have been dumping their small-cap holdings but keeping their large-cap
stocks -- a move that bodes well for income investors.
In this environment of single-digit growth and rising interest rates,
investors will need to work diligently to uncover quality stocks with
solid growth prospects and secure dividends. As usual, we will continue
to keep a close watch and alert readers to entry opportunities in
fundamentally strong, yet currently undervalued, income stocks. With
this in mind, in our February issue of High-Yield Investing we
will take an in-depth look at a few carefully selected stocks in sectors
that we feel are poised to post the strongest gains throughout 2005.
Important Note: To view the remainder of this article,
in which Carla Pasternak provides an in-depth analysis of her three
model income portfolios and dozens of individual income-oriented
investments, you'll need to subscribe to our premium High-Yield
Investing newsletter. After you subscribe you'll receive
immediate access to the remainder of this article, as well as our
semimonthly High-Yield Investing newsletter and a host of
additional premium content. Please visit one of the following links to
continue...
|
Please Note: The above article was merely a
small excerpt from an issue of our premium income newsletter -- High-Yield
Investing. In each issue Carla Pasternak presents
a wealth of information and timely investment ideas to help you earn a
steady income stream from your investments. To receive a
complimentary three-week trial or to learn more about our High-Yield
Investing service, please visit the following link: http://www.StreetAuthority.com/subscribe.asp#hy |
|
|
|
Investing Doesn't Get Any Easier Than This |
Stock picker Amy
Calistri's strategy is as simple as investing gets -- just one idea
a month designed to make money in today's market. Invest this way
and you don't have to worry about oil prices, automaker bailouts, or
what the Fed is up to -- because every "bad" economic development
actually helps some investment or another.Your investing life can
get a lot simpler -- starting today.
Go here to learn about Amy's simple investing strategy.
|
|
|
