U.S. equity markets are facing widespread volatility, thanks to trade negotiations and recent geopolitical risks owing to the U.S. strike on Syrian chemical facilities.
Although the markets shrugged off fears stemming from the Syria attack and proposed sanctions on Russia as the earnings season is underway, the long-term impact of such factors might increase the appeal of dividend investing.
Into the Headlines
Market turbulence has brought portfolio reallocation back into play. Tensions between Washington and Beijing have been bothering the markets for quite some time now. Although talks of negotiations have been doing the rounds, nothing can be said for certain. To sail through market volatility, allocating a portion of your portfolio to safe dividend funds seems like a judicious option.
Moreover, the recent chemical attack in Syria has increased tensions pertaining to U.S.-Russia relations. The recent missile strikes on Syrian chemical plants by a U.S.-led coalition with France and U.K. has complicated the situation. Anatoly Antonov, Russia’s ambassador to the United States, told the Wall Street Journal, “We warned that such actions will not be left without consequences. All responsibility for them rests with Washington, London, and Paris. Insulting the president of Russia is unacceptable and inadmissible.”
In the event of a response by Russia, Iran or Syria, the markets might take a hit on actual war concerns, instead of only a trade war. Although the odds of that happening are low, it is advisable to safeguard one’s portfolio against such severe events. This is because, during such volatile times, it is difficult to beat algorithmic trading outlets, which are programmed to start selling by merely reading news headlines indicating at an adverse event.
Moving on to interest rate, the CME Fed watch tool currently forecasts two more rate hikes in 2018, which many analysts believe has already been priced in by the Wall Street. In such a scenario, dividend-paying securities provide consistent income to investors. The uniqueness of these securities is their increased returns when political uncertainty weighs on markets, more so because apart from high dividend, these securities exhibit low volatility as they are stable and mature companies.