The markets struggled to find a sense of direction today, but by
the end of the day, sellers prevailed over buyers. Bulls were
pinning their hopes on this morning's report that average home
prices in the nation's 20 biggest cities rose 2.2% in May from the
prior month.
As far as earnings are concerned, investors were liking the news
from the likes of Cummins Inc. (
CMI
), Eastman Chemical (
EMN
), Pfizer (
PFE
), and Valero Energy (
VLO
). On the flipside, sellers rushed for the exits on uncertain
guidance from high-end retailer Coach (
COH
), which closed down over 18%. Also lower today on earnings results
were shares of Humana (
HUM
), Seagate Technology (
STX
), and Archer Daniels Midland (
ADM
).
How Investors Deal with the Rising Cost of Living
For quite some time, market watchers have been using oil prices
as a gauge for the overall economy. As much as we like to see
economic strength, the danger of oil prices rising amid market
rallies can be very troubling for folks struggling to pay their
bills - not to mention trying to save for retirement.
Clearly, the onus is on investors to dig deep to prepare for
higher expenses and do everything in their power to generate higher
income, both from their career and their investments. Today's
earnings report from high-end retailer Coach (
COH
) noted the company is preparing for a challenging year ahead. This
comment is certainly a sign that discretionary income is being hurt
by rising energy costs and of course a tough job environment.
How are some coping with the economic picture of late? Well,
we're seeing an upswing of entrepreneurs hoping to remove the
salary cap forced upon people who work for someone else. We've also
seen recent strength in the municipal bond markets, as investors
continue to seek tax-advantaged strategies for their taxable
accounts. Finally, dividend investors continue to pile into
dividend-related stocks/funds/etfs in non-taxable accounts.
As I've commented many times in the past, the volatility of
various benchmark economic reports is staggering. One week
economists declare things have bottomed for good and the worst is
over (especially concerning housing/real estate data), but then the
next batch of numbers is paints the exact opposite picture. The
psychological effect of these sort of swings remains to be seen,
but my take is that people are just plain afraid. Add in the fact
that many experts regularly dispute the honesty or validity of
economic data, and my feeling is that a potential economic
turnaround will be that much more difficult.
We continue to try our best to parse through the economic data.
One thing is for certain, though: if you get too bearish you will
miss out on great investing opportunities. If you get to bullish,
on the other hand, you may be caught chasing bad risk/reward
situations. For example, traders tend to all pile into recently
high-flying names, but when things inevitably turn south, a mass
exodus from the stock occurs.
This situation can be especially troublesome when
decent-yielding stocks are pushed higher and higher, leading to
much lower yields. Remember, momentum traders aren't in these
stocks for the long term. We're seeing many well-known brands right
now whose yields are being chased higher and higher, but the
company's simply won't be able to sustain the inflated
valuations.
As the chase for yield/income continues, we'll keep subscribers
updated about any and all changes we see coming in the markets and
the economy.
Income, Income, Income
At Dividend.com, we maintain our focus on the best
income-producing investments the markets have to offer during time
of heightened volatility. We want to make sure we have only the
most pullback-resistant names on our
Best Dividend Stocks List
. Also, if we see the market putting in what looks like a decent
bottom, we will be prepared to scale up the list of stocks we like.
Stay tuned and be sure to look for
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