Sure, I get that a Chinese devaluation amounts to a de facto trade war, not unlike the ones from Japan or Europe. These devaluations help markets at home do well while they hurt those abroad, mainly U.S. manufacturers.
But there are odd byproducts of the move, and one of them is a decline in interest rates in this country, in part because the Fed is less likely to raise rates for fear of a 1937 situation -- when the U.S. moved up rates because the Fed thought the Great Depression was behind it, and instead we got thrown back into a recession that only World War Two was able to combat.
Tough way to beat a recession, not the way you want to go. Also, remember as I pointed out numerous times, we are now in a deflationary spiral, which China's move augments, and that, too, is good for lowering interest rates.
I point this out because, historically, it is a very difficult situation for a stock market that is filled with decently yielding stocks and companies that benefit from falling oil prices. These kinds of stocks are like magnets for money. Who wants to short a 4.7% yielder like Entergy (ETR) in a growth market -- the southwest -- when rates are so low?
Do you want to sell or buy Kraft Heinz (KHC) ¿ which we own in the Action Alerts PLUS charity portfolio -- now that the pencil-pushers at 3G, some of the toughest budgeters around, are running the combined enterprise and giving you almost a 3% yield as they amalgamate these two companies that pump out oodles of steady cash flow?
Sorry, I am attracted, not repelled, by the utility Spectra Energy (SE), which is being tarred by association with oil and natural gas, when I could argue that it is a huge beneficiary of the stuff, because more customers will switch to natural gas from oil as the company completes its pipeline build out.
I've been waiting for General Mills (GIS) to come in ever since it went more organic and natural, while being committed to that fabulous dividend. So I can't run from it. Same with Ventas (VTR) at 4.7%, the assisted living real estate investment trust that is so darned consistent.
What's not to like about Verizon (VZ) and AT&T (T), the former with a safe 4.7% yield and the latter at 5.40% with much better dividend coverage now that the deal with Direct TV's been done?
Finally, Wal-Mart's (WMT) gotten to the point where it yields 2.7%, and one could argue that with 100 million shoppers visiting every single week, shoppers who fill up at gas stations to go there, and with a gigantic slate of products made in China that just got a whole lot cheaper to buy, the stock is begging to be at least looked at, if not bought.
I know that business gets soft when you have a trade war. I know the exporters are going to do terribly. That's a given. It's obvious that companies that sell big amounts of goods in China will have their stocks targeted for sale, as we see from companies as diverse as Caterpillar (CAT) with an almost 4% yield that doesn't seem to be helping, or Apple (AAPL), with that monster buyback but a perceived weakness in cellphone sales that now will be lost to local Chinese companies.
I just want to present the other side, because that's the side that's been winning anyway. The money seems to flow back in without skipping a beat whenever international companies are threatened; largely domestic companies go unscathed and pack a yield punch that's vastly superior to Treasuries -- and yet they're often seemingly just as safe as those risk-free holdings.