All the news right now is about the coronavirus and its
effect on the economy – and rightly so. The damage – from lockdowns,
quarantines, trade and travel restrictions – is unprecedented. US unemployment
claims have rocketed in recent weeks, and government data indicates that
between 14 and 17 million Americans are unemployed due to the shutdowns. There
is no longer any question about hitting a recession – it’s here. What matters
now is, how deep will it go, how long will it last, and how steeply will it recover.
Stock markets plummeted when the lockdowns began, but last
week was Wall Street’s best since 1974. Markets bottomed out on March 23, and
what seemed at first to be a ‘bear market rally’ has turned into something more
substantial. Traders are taking advantage of low stock prices to position
themselves for what the inevitable economic recovery. Of particular interest
are dividend stocks, a segment that is showing high upside potential. Dividend
stocks offer investors more than just potential for price appreciation – the
dividend payout also offers a steady income stream, in good times and bad.
These stocks are commonly used as defensive plays, to protect a portfolio’s
income qualities when share prices fall.
RBC Capital, one of the major names on the Street, sees
signs that the markets be starting to heal. Institutional investors have, for
the second consecutive week, pushed up their positioning, buying more than
selling. And retail investors, in the weekly survey of sentiment, may be
showing a return to bullishness. In the latest survey results, bearish
sentiment slipped from 52.07% to 49.73%, the first time in three weeks that
bearish views had slipped below 50%.
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