Noting that bond yields are "absurdly low" in today's market with the prospect of inflation ahead, Gilreath pointed out that bonds could take a 10% hit in price if interest rates rise just one percent. He suggested an alternative may be solid industrial stocks paying dividends and having low downside risk characteristics, pointing to 3M (MMM), Caterpillar (CAT), and Intel Corporation (INTC) as examples.
Asked whether stimulus measures need extending for economic recovery, Gilreath noted the S&P continues to hit new highs (indicators the recession may be ending), which has only happened four times during a recession. After each one—in 1961, 1980, 1982, and 1991—markets one year later were an average of 11% higher. Strong retail sales and home prices suggest the economy is moving in the right direction. With odds of a stimulus deal from Congress relatively small due to the upcoming election, the odds of investment income from solid industrial stocks being higher years from now appear greater than bond returns of one to two percent over that same period of time, Gilreath concluded.
Disclaimer: Sheaff Brock Investment Advisors, LLC ("SBIA") is an SEC-registered investment advisor founded in 2001. Clients or prospective clients are directed to SBIA's Form ADV Part 2A prior to deciding to participate in any portfolio or making any investment decision. The views and opinions in the preceding commentary are subject to change without notice and are as of the date of the report. There is no guarantee that any market forecast set forth in the commentary will be realized. This material represents an assessment of the market environment at a specific point in time, should not be relied upon as investment advice, and is not intended to predict or depict performance of any investment.