Vote Your Conscience, But Keep Your Investments Objective
It’s nearly over…
With Election Day finally upon us, the rumblings from both sides regarding the “doomsday” scenario that will fall upon our economy should their opponent get elected continue to grow louder.
But here’s the thing… both sides are probably right.
Do I think we’re going fall into a recession in the future? Yes, absolutely. It’s part of the economic cycle.
Now I know this sort of talk might anger folks, especially those who like to point fingers and give blame to the opposing party. But the truth is that the market doesn’t really care who you vote for.
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It’s true that the market has been more volatile than usual in the weeks leading up to today. The CBOE Volatility Index was at the top of its longest streak of gains since 2013 at the end of last week. However, the index fell significantly on Monday, indicating that the chances of a market crash remain low. On the flip-side, according to a recent survey of economists by The Wall Street Journal, the chances of a recession within the next four years (regardless of who is elected) are quite high, at about 60%.
That is not an assessment that the next U.S. president will cause a downturn. Rather, it is an acknowledgment that throughout its history the American economy has never grown for more than a decade without a recession. In other words, over the next four years, something likely will knock the economy off course — whether it is exhaustion of the economy’s cyclical momentum, a policy mistake from the Federal Reserve or some outside shock.
As The Wall Street Journal puts it, the current period of expansion began in June 2009. That means we’re running at 88 straight months of growth, the fourth-longest period since 1854. That would be great news if the economy were humming right along, but with annual GDP growth at 2.1%, it marks the slowest growth since WW II.
#-ad_banner-#Now, I don’t want to suggest that presidents are irrelevant to markets and the economy. Their policies and actions can have an effect on commodity and equity prices as well as interest rates, like entering a war or implementing subsidies or tariffs on goods. I’m simply saying we must approach the market with some level of objectivity. We know that investor behavior can make stocks march higher than expected. After all, it is the emotions and behavior of investors that create part of the momentum equation.
This week my Maximum Profit system flagged a stock whose tailwinds seem to stem from investors who are not only worried about the future of equity prices, but also tired of the dismal interest rates they’re getting in their savings accounts. So they’ve begun piling into this infrastructure stock that yields 6.2% and has outpaced the broader market by 16 percentage points this year.
In the last 12 months, the company has generated $1.6 billion, with $268 million going directly to free cash flow. That means for every dollar that the company brings in, 16 cents is straight profit — money the company uses to dish out healthy dividends.
It’s not very often that a company like this one passes the rigorous momentum-based criteria of the Maximum Profit system. Utility and infrastructure-related companies are usually better suited for income-oriented investors.
But we’re in different investing environment. Money markets, CDs and Treasuries yield next to nothing and the commodity sector has been in flux, providing investors with a wild and unpredictable ride. So instead of guessing what the market might do next, it seems investors have decided to put their hard earned dollars into solid dividend-paying companies like my pick for this week.
Unfortunately, I can’t reveal the name of this company in today’s issue. This pick is an exclusive for my subscribers. Just remember that as the results start coming tonight, investors are going to need a solid game plan regardless of who is elected. In the meantime, if you’d like to know more about my Maximum Profit newsletter and how you can reduce risk while earning higher returns, click here.