The election of Donald Trump as the next U.S. president has created a challenge for investors in bonds and dividend-paying equities.
After the Nov. 8 election, bond yields rose, Treasuries endured stiff selling and dividend-paying utilities, real estate investment trusts (REITs) and telecommunications stocks fell. Dividend-paying stocks in general took a hit in the markets in the days after the election but offered investors a glimmer of hope by regaining a bit of ground this week.
A key reason why bonds and dividend-paying equities are under pressure is the expected rise in interest rates. If the Trump administration ushers in deficit spending, pressure could mount for rates to climb yet further, said Andrew McCormick, head of Baltimore-based T. Rowe Price’s U.S. taxable bond team.
Expect volatility in bonds, with the market reacting in a “saw-tooth” pattern, McCormick said. Indeed, downward pressure could be applied to U.S. interest rates if investors buy U.S. Treasuries to “flee riskier assets,” he added.
“Bond markets globally are likely to see upward pressure on yields over the long term, with a steepening of the yield curve,” said Quentin Fitzsimmons, T. Rowe Price’s global bond manager.
At greatest risk will be emerging markets, such as Mexico, which already have lost ground since Trump’s election, Fitzsimmons said.
Paul Dykewicz is the editorial director of Eagle Financial Publications, editor of Stockinvestor.com and DividendInvestor.com,a columnist for Townhall and Townhall Finance, a commentator and the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a Foreword by legendary football coach Lou Holtz. His next local appearances to discuss and sign copies of his book are Saturday, Dec. 10, 11 am, at Curmudgeon Books, Marley Station Mall, 7900 Ritchie Hwy., Glen Burnie, MD, and Saturday, Dec. 17, noon, at Greetings and Readings, Hunt Valley Towne Centre, 118 Shawan Rd., Suit Aa, Cockeysville, MD. Visit Paul’s website at www.holysmokesbook.com and follow him on Twitter @PaulDykewicz.
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