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Economic uncertainity


Monetary Policy Uncertainty is a Reason to Own Dividends

Aaron Levitt Aug 29, 2019

If there’s one thing traders and investors crave, it’s clarity. It’s when expectations actually match up to real data points. Whether it’s earnings estimates, presidential election outcomes or economic data, when they expect “A,” they really want to see just that. And when that doesn’t happen, they tend to freak out. This is the reason for the CBOE Volatility Index and what it measures. We’re looking at the magnitude of the “freak-out.” The problem comes down to planning, investors like to be able to plan for certain scenarios and when they can’t, we see heightened volatility.

And while there is plenty of uncertainty in the marketplace, perhaps none is causing more stress for investors than the Fed.

Just a few weeks ago, we were looking at higher benchmark interest rates. But now, we’ve had one rate cut and potentially more down the road. Nonetheless, the data is confusing and doesn’t suggest a move either way. For investors, this creates a hard environment to plan for. There is one solution, though, and that would be a hefty dose of dividend stocks. It turns out, dividend stocks make for a great play as the Fed keeps flip-flopping on rates.

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