February started off with markets correcting as the bond market freaked out over the possibility of the 10-year US Treasury Bond breaching the 3% yield level for the first time in several years. Once the second order panic in the equity markets ended, cooler heads prevailed and stocks rallied back.
As the month ended, fears of further Federal Reserve tightening, after new FOMC Chair Jerome Powell testified in Congress, pushed the major indexes into a 3-day losing streak. Again, it comes back to the bond market’s obsession with the 10-year US Treasury Yield. So, (loosely borrowing the title of a Sherlock Holmes novel), what is the 3 percent solution? At the end of the day, it is a tug of war between economic expansion and inflation.
I am not overly concerned about the growth segment of equity market as interest rates rise. However, the more interest rate sensitive, dividend-oriented equity value stocks are more at risk. This is evident from the year-to-date 7.27% decline in the S&P 500 Low Volatility High Dividend Index (SP5LVHD). I think that the risk is contained and transitory, unless interest rates rise more rapidly than expected. Our portfolios benchmarked to the SP5LVHD index have not fared as poorly as I have underweight the more interest sensitive utility, energy and real estate sectors.
In case you were not able to catch my interview on CNBC earlier this week, here is that segment.
As it turns out, I mentioned my bullish opinion for Priceline on CNBC. Two days later, the company reported strong operating results and changed it corporate name to Booking Holdings (BKNG) and the stock surged to an all-time high on strong volume.
Next week I will be speaking at a conference in Bogota, Columbia and working from my hotel room. Believe it or not, Bogota is in the same time zone as New York. Should you need to contact me when I am travelling, the best way is by email.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long BKNG — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant, beverage and agricultural stocks. An individual subscription to the newsletter can be ordered at www.restaurantstox.com Furthermore; Scott is also a professor at the Seton Hall Stillman School of Business in South Orange, NJ.
– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
– You can email Scott at firstname.lastname@example.org
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