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The Fed’s Change of Heart and Dividend Stocks

Aaron Levitt Sep 03, 2020

Unless you’ve been living under a rock, you know that the coronavirus pandemic has stifled the world’s economy. Thanks to the virus and measures to stop its spread, a wide variety of economic data has turned south. And as we’ve continued to work from home, social distance, and quarantine ourselves, the outlook isn’t so great. The IMF is now predicting a nearly 5% contraction in the world’s economic output this year.

So, it’s easy to see why the Federal Reserve has pulled out all the stops in its efforts to fight the contraction in growth. From lowering interest rates to resuming its bond buying programs, the Fed’s playbook looks a lot like the Great Recession.

But now, it’s turned to a new page.

The Fed has agreed to stop directly targeting inflation as its gauge for policy. It’s a huge deal and basically gives the Central Bank free reign to let inflation run a bit higher than its original targets. For investors, especially income seekers, this is a huge deal, and one that has plenty of portfolio implications.

Find out more about dividends and inflation here.

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