Wednesday, June 28, 2017

Chart Talk {06.28.17}

Above is a chart of the iShares select dividend ETF.  I'm showing it this morning as a proxy for all dividend paying ETFs and want to use it to pose a question.    The question is why aren't bond proxies like this selling off harder if we're headed into an extended rising interest rate cycle?  I mean shouldn't these be under a bit more pressure if investors believe they can do better in bonds?  

The Federal Reserve says the US economy is doing well enough for it to not only continue to raise interest rates but end its accommodative policies regarding the bonds it has been buying since the depths of the financial crisis.  Yet, the bond market doesn't seem to buy into this argument.  Treasury bonds have barely budged in the past month.  Remember the Fed has raised rates in that period and its members have been out there talking up the economy.   So you would think you would see a bit of rotation out of these dividend bearing names.  So far that's not happened in any significant way.  I don't have an answer.  I'm just posing the question and I'll ponder that a bit over the next few days.

PS.  I know that the chart of DVY shows a rather significant drop yesterday but that's likely because somewhere in the past few days this ETF has gone ex-dividend.  Stocks and ETFs typically drop by the value of their dividend once it's been declared.

*Long DVY in client and personal accounts.  Please note positions can change at anytime without notice either on this blog or via other forms of electronic communication.