The War on Savers Is Now Creating Income Refugees
The War on Savers is reaching new levels of intensity. And it’s creating a generation of “income refugees” fleeing the financial carnage.
Maybe you’re feeling this pressure in your own retirement plan.
Low interest rates have made it impossible to generate any kind of meaningful income from savings accounts.
Treasury bond yields, corporate bond yields, and money market fund yields have followed the same path.
People who worked hard to be responsible with their savings are now being penalized. While borrowers get all the benefit of the Fed’s zero percent interest rates.
And now, a brand new attack has been launched on savers making it even more difficult to get income from your nest egg.
Today, I want to make sure that you’re aware of this challenge. That way you can protect your retirement and the wealth you’ve worked so hard to save.
And the good news is that there’s also a silver lining that can help you catch up if you’ve been a victim of this war on savers!
The Newest Challenge for Income Investors
Low interest rates were already wreaking havoc on retirement plans before the coronavirus crisis.
But as soon as America started taking this crisis seriously, the Fed doubled down on its zero interest rate policy, and now officials are even floating the idea of negative interest rates here in the U.S..
On top of this, the economic fallout from the coronavirus crisis has led to a number of key dividend stocks reducing — or even eliminating — the payments sent to investors.
This is terrible for savers!
Up to this point, blue chip dividend stocks were the one place that retirees could look toward for some semblance of reasonable income.
But now, a number of big companies like Disney (DIS), Southwest Airlines (LUV), Exxon Mobil (XOM) and even Ford Motor (F) have suspended their dividends.
Investors who count on these dividends for income now have no choice but to sell these stocks and look for new ways to generate their lost income.
These investors are now making up a wave of “income refugees” in search of shelter from this escalating war on savers.
Get Ready for the Wave of Refugees
The coronavirus crisis has created a sharp divide between the “haves” and the “have nots” — both on a personal level and with individual companies.
Companies with business tied to travel, leisure, restaurants, and certain areas of retail are facing serious pressure. Energy companies are also struggling thanks to plummeting oil prices.
At the same time, companies that benefit from employees working from home are doing very well! The 5G network rollout is more important than ever (with even bigger profit projections). And companies that sell consumer staples like hand sanitizer and toilet paper will continue to operate healthy businesses.
In the stock market, we’ve moved from a period of panic (when investors were selling everything) to a period of discerning which companies will continue to operate profitable businesses, and which companies will continue to struggle.
That’s where our “income refugees” come into play.
Investors who need income are pulling cash out of the struggling stocks and moving that capital into healthy investments.
And as these refugees take action, and move to the safe places in the market, we’re going to start to see crowds of investors piling into healthy stocks that pay great dividends.
It’s a silver lining for those of us who have always been fans of stable companies with great yields.
Preparing Your Portfolio for This Wave of New Capital
The year 2020 has not started out as an “easy” one for investors.
But that doesn’t mean it can’t be profitable for you.
In fact, the silver lining tied to this wave of income refugees is that we’re going to see steadily higher prices for dividend companies that will continue to grow their businesses.
Economics 101 tells us that when demand for anything increases, the price will naturally trend higher. We also know that when supply decreases, this also forces prices to move higher.
Coronavirus has caused the number of quality stocks that pay reliable dividends to decrease.
At the same time, the number of investors looking for these quality dividend stocks has increased!
These two forces will continue to drive prices for our favorite dividend stocks higher this year.
And that’s why today, I’m urging you to stay the course.
Continue to hold the reliable dividend plays that we’ve been covering here at The Daily Edge. And consider using your dividend payments to buy more shares. That way, your income will continue to compound over time as your number of shares increases — while these companies steadily grow their dividends.
Here’s to growing and protecting your wealth!