With the 10 year treasury hanging around the 4.50% area and looking for reasons to go higher yet and the very likely possibility of a government shutdown equities are weak once again this morning.
I read that going into a government shutdown typically brings a 8-10% reduction in prices of equities, but they bounce back nicely over the course of the next number of months. Certainly we have seen prices falling during the last couple months with the S&P500 off approximately 5% certainly we could see another 5% in the next couple weeks. Generally speaking a government shutdown doesn’t affect the way I will invest–ever thinking you can react in a helpful way to events like this is typically a fallacy.
Yesterday I didn’t do anything, but I did notice a 5.75% JPMorgan CD available on eTrade–why buy 5.75% when higher rates are just around the corner? A hot PCE (personal consumption expenditures) later this week would send rates up toward 6% and a conservative investor would have to do some heavy buying at that level.
I noticed in the comments on this site that folks are starting to look at REITs for potential purchase–seems like a decent idea because of the good correlation with movement in interest rates. I noticed Brad Thomas has a ‘sell’ article on WP Carey today–has Brad ever published a sell article? With this sell I feel compelled to review WPC as a potential buy. Anyone covering REITs on Seeking Alpha has been mostly ‘creamed’–as most all the big names have been decimated–Realty Income (O) the darling of all the writers, is trading at a 52 week low and all the writers have been ‘backing up their trucks’ all the way down. The problem with most writers on Seeking Alpha is they confuse good fundamentals with rising stock prices—anyone can look and see if the income statement is currently good–but what are the micro and macro economic factors and what has history shown drives equity prices in a certain sector. The criticism of these folks has been fairly heavy–and well deserved–if you say ‘buy, buy, buy’ and a charge a fee for bad recommendations you should expect criticism. Well let’s look for some buys in the REITs – a bottom will come in them and super capital gains may be ahead–but when?