Archive

Posts Tagged ‘yield scarcity’

Balancing Perception, Reality, Equities and Fixed Income

April 17, 2012 Comments off

Never underestimate the power of perception to influence people’s fiscal behavior. Perception is such a significant influence, in fact, that economic tea-leaf readers have developed a myriad of surveys and indicators to monitor individuals’ perceptions of the investing environment because perceptions can—and do—move markets. When sentiment is negative, investors tend to shift out of assets they perceive as “risky” and into assets they perceive as “safe.”  Ed Perks, Senior VP and director of Core/Hybrid Portfolio Management for Franklin Equity Group, , is well aware of the role perception plays in the markets and even took note of it in a previous post to these pages: see “Perception vs. Reality.” Here he picks up the thread with his strategy for determining a strategic mix between equities and fixed income when market perceptions change, and what he sees as the fundamental reality today. His thoughts, in brief:

  • We’ve seen a gradual decline in market volatility levels in the first quarter and, at the same time, an increase in risk-tolerance among investors.
  • Despite market turbulence, corporate profits have remained strong.
  • We think rewarding shareholders, achieving dividend growth, and engaging in share buy-backs should be a big part of the corporate story in 2012.
  • Dividend-paying common stocks offer an interesting opportunity amid the reality of today’s yield-scarce environment. Read more…