World events of the past several days, including the conflict between North and South Korea and Ireland’s bailout, have brought forth more questions about bond market stability, the future of interest rates, and how income investors may fare.
As stated in earlier posts, investing in global bonds remains prudent for diversification, high yield potential, and protection against rising U.S. interest rates. Many investors continued to buy U.S. debt/bonds even though they were concerned about the fiscal health of California and their potential need for a bailout. I see the Euro zone similarly. Although the global bond sector includes more than just Europe, periods of decline in the region may make good entry points for investing into the sector and/or rebalancing existing positions.
Each time a conflict arises that is viewed as a potential war, certain stocks seem to draw more attention. They of course include defense firms, companies that rebuild after the devastation, and biotech companies. I often see people liquidating their more stable dividend paying stocks for these near term opportunities. I would like to remind you that the income stream from these dividend paying stocks is crucial to most income investors and should not be disrupted.
If either of these world events is causing questions or concerns to arise, please don’t hesitate to contact me.