Insight & action

Where to Get "Paid to Wait" for a Rate Rise 

There are very few signs of inflation, especially based on data reported globally in the past 24 hours.

Most notably, inflation in the U.S. is running well below the Fed's 2 percent year-over-year target (the core personal consumption expenditures measure, or PCE, is rising just 1.1 percent). As strategist Adrian Miller of GMP Securities writes this morning to clients, "...those participants on the FOMC [Federal Open Market Committee] looking for a hike by the end of 2014 -- per yesterday’s minutes -- will go unsatisfied."

Chairmen Yellen is tapering the bond-buying program, but she's not about to raise rates. For more evidence as to why, we highlight the lowered guidance in Wal-Mart Stores Inc.'s earnings press release this morning:

Bottom line, rates will likely stay low for a long time. That means investors looking for income have to get creative. So today we note three exchange-traded funds that provide dividend yields of roughly 5 percent to 6 percent. In addition, they're all up this year, unlike the S&P 500, which is down -0.9 percent. We've included the high-yield bond fund HYG, a master limited partnerships focused on infrastructure (AMJ) and a third ETF comprised of real estate investment trusts (VNQ).

Oppenheimer strategist John Stoltzfus calls this "getting paid to wait." Like GMP's Miller, we expect to wait well into 2015 for rates to rise.

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