Markets are getting spooked in 2018. The threat of higher rates – four this year instead of three – and the U.S. President planning on imposing steep tariffs on aluminum and steel are hurting stock markets. One thing is certain: investors must plan for a higher-rate environment and adjust their weighting in bonds and telecom.
BCE (TSX: BCE) closed near yearly lows despite paying a dividend yielding 5.51 percent. At a 17x P/E and debt/equity of just 1.60 times. The local paper, Toronto Star, uncovered BCE’s Bell using unethical sales tactics to gain customers. BCE must clean up its act and deliver better service quality and customer care if it wants its stock to reverse.
U.S. Bonds, notably the 10-year (IEF), fell 3.3% YTD and the yield is nearing 3 percent. The higher Fed rates move, the higher the risk the 3% yield will pull money away from stocks and towards bonds. Watch the 30-year (TLT) too. The ETF is down nearly 9% (as at last week’s close). At these levels, investors cannot fully ignore the impact higher rates will have on stocks.
Once the market prices in the higher rates, telecoms and bonds will stop falling. That would be a good time to start accumulating a position in those two sectors.
