Yesterday, Lou revealed the specific sector that’s set to outperform right now:
Biotech. Simply put, given what’s happening with the coronavirus, if you invest in the right biotech companies, you could earn huge returns.
But what else can you do to shore up your finances — especially if you’re currently out of work or retired?
More specifically, what can you do to increase your current income?
Today, we’ll look at three different options.
Traditionally, fixed-income investors have relied on dividend paying stocks like Home Depot or Kraft Heinz to bring in a stable cash stream.
But given what’s happening, it will be challenging for companies to keep paying their dividend. After all, dividends are closely tied to a company’s earnings — and earnings have already started to crumble.
Prior to the coronavirus crisis, it was expected that companies in the S&P 500 would increase their dividend payouts by about 10% this year…
But now, for the first time since the 2009 recession, dividends are likely to fall, or to be cut altogether.
As CNBC reported this week, “HSBC, Standard Chartered, Airbus, and Rolls Royce are suspending or cutting dividend payments due to the economic and market disruption caused by the coronavirus outbreak.”
Meanwhile, oil-related companies have already cut their dividends to the bone: Occidental Petroleum and Apache, for example, reduced their dividends by 86% and 90%, respectively.
And as MarketWatch reported on Monday, the list of potential dividend cuts also includes major household names like General Mills, UPS, Coca-Cola, and more than fifty others.
It is not a good time to be a dividend investor.
On March 15, the Federal Reserve lowered its key rate to a range of just 0% to 0.25%.
It is now virtually impossible to earn a financial return from fixed-income investments like CDs, savings accounts, and government and corporate bonds.
In fact, after inflation, many such investments now offer yields that are negative.
The vast majority of government bonds from Europe and Japan already offer negative yields. Maybe it’s our turn now in the U.S.
What a disaster. With negative yields, not only aren’t you making money with your investments…
But you’re actually losing money every day.
Government Rescue Plan
The “CARES” Act (short for “Coronavirus Aid, Relief and Economic Security Act”) is a $2 trillion rescue plan courtesy of the U.S. government.
Depending on your income, you’re eligible to receive a check for up to $1,200.
$1,200 is better than nothing…
But given that this crisis could end up lasting many, many months, it won’t go far. Some have even accused this plan of being a “bribe,” a way to avoid social unrest.
Furthermore, no one has received a penny so far.
Bottom line: don’t count on these funds to save your financial future.
Where Else To Look?
If you’re looking to shore up your finances, there are a handful of places to start your search.
Today, we looked at a few of the most obvious places: dividend-paying stocks, bonds, and the government rescue plan.
But as you learned, these three options aren’t able to provide much relief right now.
So, tomorrow, Wayne will dig into some other options…
Including some assets that are known to be “recession-proof.”