Rising Energy Prices and Interest Rates: Danger and Opportunity

October is the month with the reputation for hosting epic market crashes. But September has historically been the worst for stock returns. And this year’s results matched the trend, as the S&P shed close to 5 percent and the Dow Jones Utility Average more than 6 percent of its value.

The silver lining is the vast majority of our Portfolio stocks are once again trading at reasonable entry points for fresh money. And ironically, specific company developments last month were strongly positive. Front and center is Illinois’ new energy law and its potential to accelerate growth for Conservative Focus stock Exelon Corp (NYSE: EXC) and deep value Vistra Energy (NYSE: VST).

Ultimately, it’s the health and growth of underlying businesses that will drive prosperity for all of our portfolio companies. But it looks increasingly like staying strong the next 12 to 18 months will depend on successfully navigating the dangers and opportunities resulting from two emerging mega factors.

One is uptrending interest rates and inflation. As I’ve pointed out before, there is no hard correlation between yearly changes in the benchmark 10-year Treasury note yield and returns for dividend paying stocks. But companies do need to be prepared for a rise what are currently the lowest borrowing costs in a generation.