As of early October the S & P 500 stock index and the DJIA (Dow) remain higher for the year – up about 8%. This has confounded many investors as there have been many worrisome conditions that have threatened the long running bull market: rising interest rates, trade concerns, upcoming midterm elections, Trump’s erratic behavior, to name a few. In the end though, investors have focused on the strong increase in corporate profits due to the tax cuts, which have made stock valuations more reasonable compared to a year ago. Still, higher interest rates are a threat to future economic growth, and the Fed has pledged to continue raising them through next year to slow the economy’s faster growth. As such, other than bank stocks – which benefit from higher rates – it’s become harder to find bargains in the stock market. It is easier to find sectors to avoid: utilities, REITs, and long term bonds, which usually do poorly in a rising interest rate environment.
In our last report we favored Citigroup (C, $73), J.P. Morgan Chase (JPM, $115.75), and Bank of America (BAC, $30.65). All are up about 5% since, and we still like them. Also, technology giants Alphabet (GOOGL, $1,182), Facebook (FB, $159.75), and Apple (AAPL, $229) continue to do well and can be bought for long term growth. For income investors, the energy infrastructure (pipelines and storage) index fund MLPI ($24.50) pays a monthly dividend and yields 6.55%.
We continue to suggest a higher than average cash position for investor portfolios. While the economy continues to grow nicely, rising interest rates may eventually restrict growth, and with the many other uncertainties out there, the market may remain volatile, and an overdue 5-10% sell-off should provide better opportunities. Please contact one of our friendly advisors for more information on any of the above securities or for a free "portfolio checkup". Unwilling to monitor your portfolio closely? We offer a portfolio management service at a very competitive rate. See the "Portfolio Management" link on this site.
Prices and yields as of October 4, 2018. The above information is believed to be reliable but is not guaranteed to be accurate. Investors should check every investment for suitability for his or her particular needs. Investing in stocks is risky and you could lose some or all of your investment. First Georgetown Securities, Inc. will furnish available investment information supporting the recommendation upon request. Of the above mentioned securities, the author maintains personal positions in Apple (AAPL), Alphabet (GOOGL), Facebook (FB), Citigroup(C), Bank of America (BAC), and MLPI.