Fed's Low-Rate Pledge May Help Dividend Stocks

The Federal Reserve Open Market Committee or FOMC came down from its financial Mt. Olympus to deliver a decision on monetary policy. The headline decision was to decrease its monthly purchases of bonds by $10 billion to $75 billion. That is what was referred to as tapering. The immediate Pavlovian reaction was to sell stocks. That however was a major mistake because the FOMC had a second message to the market. That message was that short term rates were going to be maintained at a range of 0 - ¼% for the foreseeable future. The second part of the FOMC statement was met with intensive buying, first reversing the aforementioned selling and then rallying to all-time highs for the Dow Jones Industrials (DJIA) and S&P 500 (SPX).

I would note that the impact of the FOMC announcement was a rush to buy dividend oriented stocks which have been forsaken ever since the tapering rumors began to circulate. Now that tapering mania is over, expect those stocks to begin to perform better, which should help the High Dividend Low Volatility portfolio that LakeView Asset Management runs on Covestor.

Source: The Street

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