Toll-road companies in China, Brazil and Italy -- including Zhejiang Expressway Co. and Arteris SA -- fit this criteria, as do U.S. retailers such as Foot Locker Inc. and Kohl’s Corp., Kinkelaar said.
Essential Tool
It’s inevitable the Fed will taper its $85 billion in monthly bond buying, though the timing and pace remain to be seen, Brodsky said. The central bank “will be losing one of its essential tools to control the long end of the market” amid signs the recovery is strengthening, he said.
The Fed probably will begin tapering at its Dec. 17-18 meeting rather than wait until January or March, according to 34 percent of economists in a Dec. 6 Bloomberg News survey, an increase from 17 percent in a Nov. 8 survey.
While an improvement in the job market has raised the odds of a change in the stimulus, any reduction should be modest to account for low inflation, James Bullard, president of the Federal Reserve Bank of St. Louis, said Dec. 9. “Should inflation not return toward target, the committee could pause tapering at subsequent meetings.”
Higher rates may encourage investors to swap equities for fixed-income securities, though a “significant move” isn’t imminent yet, Morgan said. When yields on 10-year Treasuries approach 4 percent, this will be a trigger for asset-allocation models, Teal added. “We’re in a transition period as equity investors adjust to a rising-rate environment,” Teal said.
Sentiment Shift
Still, the underperformance of many high-dividend-paying stocks in the past eight months shows a sentiment shift already is under way as some investors falsely assumed many of these stocks were “safe assets,” Kinkelaar said. Money managers with dividend-paying strategies flocked into “a fairly limited menu of attractive-yielding stocks in the U.S.,” which caused those share prices to increase significantly since the 18-month recession that began six years ago, he said.
“There was a scarcity effect that benefited some of these stocks and now the reverse is happening.”