There’s a clamor for safe yield out there. A frenzy the likes of which you rarely see.
Utilities. Telecommunications services. Consumer staples. These Steady Eddie-type sectors have absolutely been on fire so far in 2016.
Look at those three S&P 500 industry groups and you’ll find gains of 14.9%, 15.9%, and 5.9%. That’s far greater than the 1.6% of the index as a whole. Bloomberg recently reported that utilities are having their best relative performance against the broad market as far back as their data goes (1989).
Looking for a few examples? Take boring old spice and seasonings maker McCormick & Co. (MKC) — which just jumped from $78 to $100 in two and a half months. That’s one of the sharpest, shortest surges in the 127-year-old company’s history.
Or how about stodgy AT&T (T)? Its shares have gone vertical, rising 15% year-to-date to an almost eight-year high.
Then there’s Campbell Soup (CPB). I know soup is good food and all. But this historically placid stock has exploded 22% in 2016 and more than 43% over the past year. Look at this monthly chart going all the way back to 1990, and you’ll only see one other similar surge – the late-1990s stock market mania.
What the heck is going on? And how can you profit?
I believe these moves have a lot less to do with soup, spices and cell phone service and a lot more to do with interest rates and the credit cycle. You have the Bank of Japan implementing negative interest rates, and the European Central Bank going further down that rabbit hole at almost every single meeting.
Then this week, Federal Reserve Chairman Janet Yellen signaled the Fed is afraid of its own shadow. Forget about whether the U.S. economy warrants more rate hikes or not, she said. They can’t do anything because they have essentially become the “Central Bank to the World.”
Investors have interpreted that attitude as “carte blanche” to buy anything that offers relatively safe yield. High-quality, low-volatility, non-economically sensitive sectors like those I mentioned earlier fit the bill. They also don’t have the late-credit-cycle risk that higher-yielding stocks do in other sectors.
It doesn’t hurt that Yellen’s comments helped add to the declines in the U.S. dollar that we’ve seen since the start of the year. That helps increase the dollar value of sales generated on foreign soil, a particular benefit for global food, beverage, and staples firms.
Personally, I’ve been recommending many of these kinds of names in my Safe Money Report. Those picks have done well. So has gold, a metal that may yield zero percent … but in a world of less-than-zero yields, that really stands out. That’s a key reason why gold just racked up its best quarterly performance in 30 years!
If you’re looking for ways to profit, I have great news for you. I plan to talk quite a bit about the credit cycle, interest-rate trends, and the surge in “safe yield” stocks on the 2016 Money, Metals, & Mining Cruise.
If you haven’t looked into it, now is a great time to call 800-797-9519 or click here. I’ll be joining several metals experts on board the Crystal Serenity for the cruise, which will sail July 10-17 from Anchorage to Vancouver.
I’m also going to be participating in a special upcoming webinar titled “The Next Phase for Gold, and How to Profit from It.” It will be held this coming Monday, April 4 from 2:00 p.m. to 2:45 p.m. EST.
I’ll be joined by Brien Lundin, Rick Rule, and Brent Cook, a trio of individuals who have intimate knowledge of the gold markets. Brien is the executive editor of Gold Newsletter, and host of the New Orleans Investment Conference. Rick works for Sprott Inc., a company that manages or administers more than eight billion Canadian dollars worth of resource and commodity assets. And Brent is a renowned exploration analyst and geologist, as well as the author of Exploration Insights.
I hope you can join me for this exciting, informative, and completely FREE, presentation. All you have to do is register online here, then tune in on Monday. I’m looking forward to speaking with you then.
In the meantime, keep an eye on the trend in safe yield names. These stocks offer a unique and attractive combination of safety, business stability, and yield – but as with any investment, corrections are inevitable. So don’t put all your eggs in one basket and do try to buy on pullbacks when you get them.
Until next time,