Investors Shift Out Of Dividend Stocks

The stock market slide in the last couple of weeks reflects a shift in investor strategy that began in the bond market and spilled into stocks. The spillover then mixed with lingering concerns about the U.S. economy, leading to the last several weeks of volatility, market observers say. “The bond market is the catalyst for this selloff,” says Quincy Krosby, market strategist with Prudential Financial. While most of the selloff occurred in the last couple weeks, it had its origins months ago. “As the 10-year yield has inched higher, the selling has led to more selling,” Krosby said.

This exodus out of bond funds has touched the stock market in two different ways, investors say, starting with dividend-paying stocks. Shares in industries such as utilities, pharmaceuticals and telecommunications are often purchased because they provide a higher-than-normal dividend. As Treasury yields rise, it makes all dividend-paying stocks less attractive to investors. That’s because Treasuries can provide a similar return with significantly less risk. Dividend-paying stocks have been hurt the past month.

Source: Washington Post

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