62 KIPLINGER’S PERSONAL FINANCE^ 05/2017INVESTINGLISE METZGERWatch for a return
to the same kinds
of high-yielding
stocks that excelled
in 2015 and 2016,
such as AT&T.
JEFF KOSNETT IS A SENIOR EDITOR AT KIPLINGER’S PERSONAL FINANCE.massive infrastructure spending pro-
gram that would goose growth.. .and
inf lation. I wouldn’t count on legisla-
tion emerging quickly or on a spending
program being as large as some expect
it to be.Fed restraint. As for short-term rates,
the Fed has said it expects to hike
them three times in 2017. Even if it
does, I don’t expect long-term rates to
rise sharply. So hang on to your bonds,
Ginnie Mae funds and real estate in-
vestment trusts that own mortgages.
Turning to stocks, the same expec-
tations that resulted in higher bond
yields have also pushed up share prices
since Election Day. Shares of firms
involved in construction and heavy
industry, such as Cummins (symbol
CMI) and U.S. Steel (X), have been es-
pecially strong. The hope is that they
will capitalize on Trump-sponsored
mega-projects, such as massive high-
way and airport upgrades.
However, investor euphoria may
colli de with the real possibility that a
deficit-constrained Congress may not
appropriate gazillions for transporta-
tion and other projects. I’d watch for a
rotation back to the same kinds of high-
yielding stocks that excelled in 2015
and 2016. I continue to favor AT&T (T, $42), which yields 4.7%.
I’d also stay with property-owning REITs. Real estate com-
panies are growth stocks that offer a potent hedge against
inf lation. A good way to own REITs is with SCHWAB U.S. REIT
(S CHH , $42), which yields 3.4% (see “The Kiplinger ETF 20
Update,” March; prices and yields are as of February 28).
Financial markets have remained remarkably cool in the
face of a seemingly endless stream of controversial actions
from the new president. Investors are clearly less worried
than headline writers. How long investors can remain so
complacent is a mystery to me. But even in normal times it’s
impossible to time the markets, so there’s no point in try-
ing. Keep hugging those interest and dividend payments. ■JEFFREY R. KOSNETT Income InvestingWhat I’m Telling Worried Readers
T
his column and Kiplinger’s In-
vesting for Income, the monthly
newsletter over which I preside,
attract many comments and queries.
This month I will address questions
from readers, many of whom are skit-
tish about the ascension of Donald
Trump to the presidency and the stock
market’s ebullient early reaction to the
new administration.
Sometimes I’m asked about a specific
stock or fund, but lately I’ve been get-
ting more inquiries about big-picture
matters. How to handle the threat of
escalating interest rates is a common
topic. Another is whether it’s time to
back off from utility stocks, real estate
investment trusts, master limited part-
nerships and other popular antidotes
to low savings yields. Then come ques-
tions that boil down to whether Trump’s
penchant for confrontation will desta-
bilize markets.
Even big-picture questions are often
couched in practical terms. One wor-
ried reader wondered if he should stop
reinvesting the tens of thousands of
dollars’ worth of dividends he collects
every year into more shares and use the
payouts to build a ladder of certificates
of deposit. (My answer: Go ahead.
That’s a clever way to trim your stock
allocation without selling shares and creating a tax liability.)
Another reader asked if he ought to leave $120,000 he’ll
need in six months in a checking account or chase a higher
return. (My reply: Put the cash in an insured online savings
account. With so little time before you need the money,
you can’t afford big losses should your quest for a higher
return misfire.) Here are my thoughts on a few other is-
sues to consider as Trump’s agenda takes shape.
First, interest rates. Kiplinger’s official forecast calls
for the yield on 10-year Treasury bonds, recently 2.4%, to
reach 3.0% by year-end. I think there’s a good chance that
the yield on the benchmark bond won’t climb that high.
The rise in yields that started last summer got an extra
charge after Election Day as investors concluded that an
all-Republican government would deliver tax cuts and a