Income-hungry investors beware: coronavirus fallout makes High Yield even higher risk
Value investing is dead! Warren Buffet knows nothing! Long live drawing random Scrabble tiles out of a bag to pick stocks!
So says day-trading Twitter star Dave Portnoy and his army of fellow sports fans-turned stock speculators. Portnoy’s logic? Stocks always go up, courtesy of Federal Reserve stimulus.
Entertainment factor aside, those Scrabble letters are emblematic of our era – where extreme central bank stimulus encourages speculation over investment and the divorce of financial markets from the real economy.
This is particularly tricky for income-seekers. All that reality-suspending stimulus has seen interest rates and yields plumb ever-deeper depths since the credit crunch. The ‘corona-crisis’ has merely turbocharged these trends, heaping dividend suspensions on income-hungry investors’ misery.