Michael Jamison, Portfolio Manager
August 12, 2019
The protracted trade war with China has recently driven the 10-year Treasury Note’s yield below 1.74%, its lowest level since November 2016. In contrast, the average yield of companies in the S&P 500 is a little above 2%, making the current environment an unusual opportunity for equity investors looking to generate income from their portfolio. According to Bloomberg, more than 55% of the stocks in the S&P 500 Index are currently generating a yield greater than the 10-year Treasury Note.
Many of our strategies at Griffin Asset Management are focused on stock dividend yields and, more importantly, the growth of income over time of our equity holdings (some strategies utilize writing covered calls as well). With prudent selection, the equity investor will fare much better than the bond investor, as equities should provide both capital appreciation in addition to a rising income stream over a 10-year and longer time horizon. On the other hand, the U.S. Treasury bond investor will get a steady income stream in addition to the capital invested in the bond returned, but no appreciation potential. So, if you are currently debating Fixed Income vs. Equities, now may be a good time to double-down on equities.