CornerCap Commentary: Skating to Where the Puck Will Be: Why Chasing Yield Might Not Always Mean Safety

SUMMARY MESSAGES

Fear about the future is causing investors to chase investments offering yield and perceived stability, in our view. Longer term, we believe the price for safety remains high. Defensive investments of course play a vital role in portfolios, but they cannot be substituted for out-of-favor offensive investments longer term.

Dividend-paying stocks play an important role in our larger cap portfolios, particularly for conservative risk profiles, but our view is that dividends alone should not be the lead criteria for owning a stock. We provide a detailed discussion below.

From a broad perspective, we are avoiding Treasurys and keep corporate bond maturities relatively short, given negative real returns. We have sold investments which we consider to have attractive but expensive yields (domestic REITs and certain stocks). US equities offer selective opportunity, particularly in out-of-favor value stocks. Commodities, European stocks, and emerging market equities may present opportunity for the long term.

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Related link: Brief Excerpts from "Pay Attention to the Thin Cow"