Investors Turn to 'Safety' Stocks to Score Dividends
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What is the main topic discussed in this episode?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. Investors are shoring up their portfolios through the end of the year with a focus on defensive sectors that pay high dividends. We'll tell you where they're looking in a moment. First, these money and market headlines you should know. The government says that single family housing starts increased by a modest 1.9 percent last month from July, leaving them below the levels they registered in the spring. Single family permits, which measure how much construction is in the pipeline, fell to their lowest level in a year. The Wall Street Journal heard on the street team says the slowdown in housing is likely to get worse.
Mortgage rates are near seven-year highs and rising prices are cutting into affordability. Meanwhile, a tight labor market and steep construction material prices are raising builders' costs. And the new tax law's limits on deductions from mortgage interest and state and local taxes makes owning a home less enticing in several U.S. states. Automotive industry experts fear the Trump administration's new $200 billion in tariffs on Chinese-made goods will hammer Chinese auto parts makers, likely raising prices for their U.S. customers who have few options to buy key parts elsewhere. The tariffs are set to take effect next week and are expected to hit a range of auto-related imports, from crank shafts and spark plugs to windshield wiper blades, and reverberate through the supply chain, potentially impacting the prices of both new and used cars.
What defensive sectors are investors shifting into for dividend income?
More than 1,000 Chinese companies export auto parts to the U.S., including axles, fog lamps, and brake rotors. The U.S. imports about $10 billion in parts from China annually, second only to Mexico's $23 billion. And on WSJ.com, Wall Street Journal reporter Leslie Sism spotlights Universal Life Insurance, a popular insurance product of the 1980s and 1990s, When interest rates were in the high single digits or above, it included both insurance and a savings account that earns income to help pay future costs and keep the premium the same.
How are recent housing starts and permits affecting market sentiment?
But today, rates are completing a decade at historically low levels, slicing into those savings accounts. And meanwhile, the aging of the earliest customers into their 70s, 80s, and even 90s has driven the yearly cost of insuring their lives much higher.
What many say about the game of football could also apply to investing in stocks. That is, a good defense can secure a win. In September, there's been a trend among investors to look beyond stocks that typically capture the spotlight and focus on more defensive sectors. And Wall Street Journal Markets reporter Akani Ohtani is here with us to discuss. So Akani, these stocks that investors are flocking to are considered safety stocks that pay a high dividend. What sectors are we talking about?
So typically investors will take a look at four sectors of the S&P 500. They look at utilities, consumer staples, so those are companies that sell basic household goods, telecom, and then real estate.
And meanwhile, many of the more high-profile stocks, they've actually tumbled as of late.
That's right. So the FANG stocks, Facebook, Apple, Amazon, Netflix and Google, have really struggled in September. And actually only Apple and Amazon have outperformed the S&P 500 since June 1st.
And the CBOE Volatility Index, also known as the VIX, it's sort of been laying dormant for the past couple of months. But now we're seeing it kind of spring to life a bit.
Yeah, and that's an interesting development because we actually saw the VIX slump 20% in July. It was a really sort of quiet period for the market where we weren't really seeing much volatility anywhere. And then the calendar flips to August, September, and it just seems like whether you're looking at emerging markets or bonds or stocks, there's been a lot more swings happening lately, and investors are definitely starting to gear up to protect against that.
And another sign of defensive moves by investors is good old-fashioned cash and cash holdings.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–1:31
2
What defensive sectors are investors shifting into for dividend income?
1:31–2:06
3
How are recent housing starts and permits affecting market sentiment?
2:06–6:14
4
What impact will tariffs on Chinese auto parts have on U.S. car prices?
6:14–6:19
Speakers
2 identifiedMore from WSJ Your Money Briefing
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