Our last two non-linkfest posts touched on the interrelated topics of long-term expected returns and the growing clientele for dividend yield. It just so happens that these very topics are the subject of a cover story in this week’s Economist.*
The article notes the difficult decisions facing investors who when they look around the world see low yields wherever they look. Fixed income investors have to move out of Treasuries into corporates to find any sort of yield.
There seem to be some better opportunities in the equity world. The roughly 2% dividend yield on US stocks provides little comfort, but investors with a global bent can likely find better opportunities in Europe and emerging markets.
How the developed world deals with its problems of too much debt and too little growth will generate very different outcomes according to asset class. From the article:
There is a good reason why no obvious winner emerges from this Cook’s tour of the asset markets. The developed world can grow out of its debt burden, inflate the debt away or fall back into recession, marked by occasional defaults. Each of those outcomes leads to a different portfolio selection.
Nobody said this investing business was ever easy…
*Thanks to HistorySquared for pointing out the article and highlighting the importance of starting yield on subsequent returns.