Breaking News
LAST CHANCE for Cyber Monday SALE: Up to 54% off InvestingPro! Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Clobber Inflation, Grab 7.6% Dividends With These Snubbed Funds

By Contrarian Outlook (Michael Foster)Stock MarketsNov 25, 2021 04:56AM ET
www.investing.com/analysis/clobber-inflation-grab-76-dividends-with-these-snubbed-funds-200609523
Clobber Inflation, Grab 7.6% Dividends With These Snubbed Funds
By Contrarian Outlook (Michael Foster)   |  Nov 25, 2021 04:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Another day, another sign the first-level crowd is (wrongly!) losing its head over inflation—and yet another opportunity for us to tap those fears for big dividends!

Let’s start with the number the headline-focused crowd can’t move past: 6.2%, which is the jump consumer prices took in October 2021, compared to a year earlier.

Inflation Lurches Higher …

CPI-Chart
CPI-Chart

But something strange is going on here—the stock market doesn’t care. While we’ve been hearing about inflation pretty much all year, the S&P 500 still jumped 25% in 2021. That’s because, while the “dumb money” panicked and sold out at various points during the year, the big institutional players—or the “smart money”—stayed long, and indeed bought more.

That’s because these pros are looking beyond the CPI to “jedi” inflation indicators like the 5-year forward inflation expectation rate, an important derivative used by economists and investment bankers.

This metric measures the 5-year Treasury and 10-year Treasury markets’ implied inflation rates, which is where the most direct and largest bets on inflation are made by the world’s biggest bond traders (we’re talking trillions of dollars here, much bigger than the stock market). Simply put, this tells us exactly how much inflation to expect over the next five years.

And, well, things look pretty tame.

… Or Does It?

Inflation Expectations 5yr-Chart
Inflation Expectations 5yr-Chart

While it’s true that this market shows inflation exceeding 2% over the next five years, at 2.24%, those expectations are not only tame, but actually a bit lower than they were at several points in the early 2010s.

In other words, the market is telling us that, yes, inflation will be higher than it was in the last few years, but not by much.

So Now What?

If inflation isn’t as big of a problem as the mainstream press says, what does that mean for markets in 2022?

The biggest takeaway is that 2021’s bull market likely has further to run. Many pockets of the economy are still improving from the pandemic, and this improvement will likely continue. That means successful funds with great portfolios, like the Liberty All Star Growth Closed Fund (NYSE:ASG) and Gabelli Equity Trust Closed Fund (NYSE:GAB), are set to keep providing investors with more profits like these.

2 Big 2021 Winners Beat Back Inflation Fears

GAB-ASG-Total Returns Chart
GAB-ASG-Total Returns Chart

ASG, with its 11% trailing-12-month yield, has a significant weightings toward tech, including top holdings Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), and Amazon.com (NASDAQ:AMZN) in its top holdings. GAB holds a large slice of its portfolio in equipment and supplies, consumer products, and food and beverage companies, as well as industrial stocks.

Since all of the above sectors are sensitive to rising inflation (and interest rates), they should see stronger returns if our pros are right and inflation isn’t the boogeyman it’s being made out to be. Meantime, these funds’ income streams outrun inflation (even at today’s elevated rate), so you’ve got a nice buffer if consumer prices do run higher for longer than expected.

Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, "7 Great Dividend Growth Stocks for a Secure Retirement."

Clobber Inflation, Grab 7.6% Dividends With These Snubbed Funds
 

Related Articles

Clobber Inflation, Grab 7.6% Dividends With These Snubbed Funds

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email