The current near-zero interest rate environment we currently find ourselves in has completely changed the investing equation for many investors who previously relied on commercial deposits or interest from savings accounts to retire.
The days of putting cash in the bank and earning double-digit interest on tat money are over, and with a new lower-for-much-longer interest rate environment comes a group of investors with really no other option than to put their savings into equities to earn a reasonable return.
Most fixed-income assets today such as bonds (government, municipal, corporate, or otherwise) provide investors with measly returns. Even the riskiest of debt, junk bonds (those with below investment-grade credit ratings) trade at ridiculously low yields. The risk-adjusted returns of stocks, therefore, have become attractive to most investors, and with many high-quality blue-chip stocks giving investors a 5%-10% dividend yield, those looking for income with possible capital appreciation upside have flocked to stocks a s away of achieving their income goals.
The “TINA” (There Is No Alternative) trade is likely to persist for some time as I believe central banks globally will need to continue stimulus long-term to keep markets functioning. Our current economic model is unsustainable without stimulus, and I do not believe we’ll see central banks let up on the gas pedal or allow markets to function as free market economics would dictate, as the end result would be catastrophic.
This means stocks are likely to continue to be an asset class which will outperform in such an environment, so investors – stay invested.
Invest wisely, my friends.
