Monthly Dividends With Fat Yields

Navigating President Trump’s Tariff Policy and Strategic Investment Opportunities

1. Introduction to Trump’s Tariff Policy

President Trump’s stance on tariffs is nothing new; his advocacy for protective trade measures dates back to 1989 when he proposed a 15% to 20% tax on Japanese imports. Fast-forward to today, Trump’s administration has implemented a 10% tariff on Chinese goods. Mexico and Canada, while temporarily exempt from a 25% tariff, must address border security and drug trafficking. Trump’s approach signals a willingness to endure short-term economic pain for potential long-term gains, urging investors to adapt their strategies.

2. The Impact of Tariffs on the Economy

Contrary to the belief that tariffs are inflationary, recent studies from the Centre for Economic Policy Research and the Financial Times suggest otherwise. Tariffs can actually slow economic growth, which may keep inflation in check. This is because a cooling economy offsets potential price increases. Additionally, companies often absorb higher costs rather than pass them on to consumers, maintaining price stability.

3. Bonds as a Safe Investment

In this economic climate, bonds emerge as a safe haven. The 10-year Treasury yield has declined since tariff implementation, indicating that the bond market is not bracing for inflation. Lower yields reflect a steady-to-falling interest rate environment, making bonds an attractive option for risk-averse investors seeking stability and predictable returns.

4. Preferred Stocks as an Investment Option

Preferred stocks offer a hybrid investment, blending features of both stocks and bonds. They provide fixed dividends and are sensitive to interest rates, making them a compelling choice in a low-yield environment. Preferred stocks are less volatile than common stocks and often represent a lower-risk investment than traditional equities.

5. Closed-End Funds: A Smart Way to Buy Preferreds

Closed-end funds (CEFs) are an efficient way to diversify a portfolio with preferred stocks. They allow investment in numerous preferred shares through a single fund, often at a discount to their net asset value. CEFs also offer professional management and leverage to amplify returns. Highlighted funds like Cohen & Steers Limited Duration Preferred and Income Fund (LDP), Flaherty & Crumrine Preferred Securities (FFC), and Nuveen Variable Rate Preferred & Income Fund (JPI) provide attractive yields and discounts, enhancing potential returns.

6. Conclusion: Building an Income-Oriented Portfolio

In conclusion, the current economic landscape under Trump’s tariff policy presents strategic investment opportunities. By focusing on bonds and preferred stocks through CEFs, investors can build a resilient, income-oriented portfolio. While the market may experience turbulence, historically, such strategies have yielded substantial long-term benefits. Investors are encouraged to consider these options to navigate the economic uncertainties effectively.