The concept of market relativity is more alive than ever in today’s economy, as gone are the days of individualistic price action in different asset classes and even stocks. With the advances in data delivery and technology, traders across the financial sector have found ways to connect the dots in pretty much all markets, and that is the one thing that these big hedge funds and investment bank traders get right.
By relativity, investors can focus on the shifting preferences between different markets, especially when taking into account what’s considered to be the next best thing. For example, the United States Bond Note Yield is typically considered the “risk-free” rate, the benchmark from which all other yields and potential risks are viewed. That is why, as the possibility of a new bond rally looms bigger, investors should prepare themselves for the rotations that would likely follow. Particularly the rotations back into dividend stocks as bond yields become less attractive next to these names. Some investors find that owning individual stocks can become a headache due to their capital requirements and risk tolerances. This strategy involves keeping up with individual company developments, earnings, price action, and everything else that entails managing a concentrated portfolio. That is why the Schwab US Dividend Equity ETF could become an attractive proposition. It is diversified well enough across different sectors and industries, giving investors a relatively smoother ride for their allocations. Investors can see that this ETF traded a bit lower as bond yields were rising recently. This price action, bringing the ETF nearly 10% off its 52-week high, is because its dividend yield couldn’t justify the added equity risk when bonds started offering 4.6% again. However, its $2.56 payout per share brought the yield to a much higher 9.3% today, starting to draw some new buyer attention
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