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Income Insights

Trumponomics: Six Observations for Income investors

By Roger S. Conrad on Mar. 10, 2018

Here are six observations on Trump policies for income investors, based on what we know now and my 30 plus years of experience.

First, don’t mix politics with portfolio management. It’s a safe bet some of you reading this article believe the president is making America great again while others think he’s leading the country off a cliff. But the only way for income investors to make money consistently is to focus on great companies that can grow earnings and dividends regardless of who is in the White House.

Second, don’t bet the farm that Trump policies will ultimately prove inflationary. That’s been the assumption of many investors since November when tax cut legislation started to pick up steam, and it’s behind the dramatic selloff in many dividend-paying stocks since.

Third, don’t assume that tightening monetary policy is bad for income investments. The Fed likely will boost interest rates when the central bank meets later this month. That action, however, will help control inflation. And remember that so-called interest rate-sensitive utility stocks and real estate investment trusts (REIT) returned upwards of 60 percent from June 2004 to June 2006, even as the federal funds rate increased from 1 to 5.25 percent.

Fourth, there’s reason to believe the cut in the corporate tax rate to 21 percent from 35 percent and repeal of the alternative minimum tax could ultimately prove deflationary, and positive for corporate profits.

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