{"id":68190,"date":"2023-10-03T09:21:31","date_gmt":"2023-10-03T13:21:31","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/the-september-stock-slide-is-serving-up-big-bargain-dividends\/"},"modified":"2023-10-03T09:21:34","modified_gmt":"2023-10-03T13:21:34","slug":"the-september-stock-slide-is-serving-up-big-bargain-dividends","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=68190","title":{"rendered":"The September Stock Slide Is Serving Up Big Bargain Dividends"},"content":{"rendered":"
\n

What happened to the stock-market rally? Simple: it\u2019s been undermined by two overdone fears: of a housing-market correction and worries around a government shutdown.<\/p>\n

But well reported-on events like these rarely have the big impact most people think they do. In fact, this pullback in stocks is a buying<\/em> opportunity, particularly in high-yield closed-end funds (CEFs).<\/p>\n

Don\u2019t Buy the Gloom Narrative Around Stocks<\/h2>\n

Before we get to potential strategies and buys, I do have to say one thing: don\u2019t let anyone tell you stocks are doomed. This year has too much positive sentiment, and the S&P 500 still <\/em>hasn\u2019t reached all-time-highs, so this isn\u2019t a pause in a bull market. It\u2019s a pause in a recovery.<\/p>\n

Not that the recovery has been smooth, mind you. We did have a banking crisis, but the market recovered in three months because, while the issues in the banking system were serious, they weren\u2019t contagious. The rest of the economy has seen profits and revenues rise as consumers return to form in a fully post-COVID world where, at least so far, high interest rates aren\u2019t hitting them too hard.<\/p>\n

That is, except for in housing.<\/p>\n

With mortgage rates more than doubling in the span of a couple years, housing affordability has crashed. And the Fed has said it might raise rates again. Even if they don\u2019t, rates are likely to stay high for a while.<\/p>\n

<\/fbs-ad><\/p>\n

However, this isn\u2019t another 2008, as the data is still good\u2014yes, house sales aren\u2019t booming, but they aren\u2019t crashing, either. Which suggests the soft landing the Federal Reserve has been aiming for is still on the table.<\/p>\n

That brings us to the current shenanigans in DC. I\u2019ve gotten some questions from readers about the effects a government shutdown could have on the economy and stock market, so I thought I\u2019d dig into the historical record. This latest fuss around government gridlock gives us a good reference to bear in mind whenever something similar crops up in the future.<\/p>\n

First, let\u2019s consider the history: the US government flirted with a shutdown and <\/em>a potential default on US Treasuries as recently as April 2023, and stocks are way up since then.<\/p>\n

Truth is, shutdowns and narrowly averted shutdowns are becoming a fact of life in America. They include a 35-day closure of the government in December 2018 and a 16-day shutdown in 2013. Both 2013 and the year following the late-2018 shutdown were strong for stocks, with the S&P 500 up 32% in 2013 and 31% in 2019.<\/p>\n

This by itself tells you that the current pause in the market\u2019s momentum is unlikely to last; a shutdown\u2014indeed just about any drama out of DC\u2014just isn\u2019t a big enough deal. Of the 10 shutdowns we\u2019ve had since 1980, none have significantly impacted the stock market over the long term.<\/p>\n

How to Buy the September Swoon<\/h2>\n

Stocks are oversold, so we want to compound our profits with an oversold CEF that is itself overly discounted and full of strong stocks.<\/p>\n

The General American Investors (GAM) <\/strong>CEF nicely fits the bill here, with its 17.9% discount to net asset value (NAV, or the value of its underlying portfolio) and focus on deep-value, high-quality large cap companies like Microsoft
\n
\n MSFT
\n <\/fbs-ticker> (MSFT), Apple
\n
\n AAPL
\n <\/fbs-ticker> (AAPL)<\/strong> and waste manager Republic Services
\n
\n RSG
\n <\/fbs-ticker> (RSG)<\/strong>. <\/strong><\/p>\n

That discount, in essence, is like buying these stocks at late 2022 levels! In fact, its portfolio nicely reflects the S&P 500 today, making it a nice fit for the current pullback:<\/p>\n

Not only is this a strong pick because stocks\u2019 temporary selloff is good for the long-term health of the market, but it\u2019s also a strong pick because of its long-term dividend payouts.<\/p>\n

GAM\u2019s payout goes under the radar because most of it is distributed at the end of the year in the form of a one-time special dividend. But on average, GAM has yielded 7.4% annually each year over the last decade, thanks to those big special payouts. This is why the fund\u2019s 17.9% discount is absurd, and why it should start to narrow soon.<\/p>\n

That\u2019s because GAM\u2019s big special payout is usually declared in November and paid out in late December. In bull years, it pushes the fund\u2019s trailing-12-month yield even higher than 7.4%. In 2021, it hit 8.8% for anyone who bought in at the start of the year.<\/p>\n

And the 14% gain in GAM\u2019s NAV this year suggests a similarly large yield is on the way as we reach the end of 2023.<\/p>\n

Until others jump into this fund and make that discount shrink, you can buy in now and get lined up for that big yield. While short-term jitters might bring stocks lower, that really is just a buying opportunity, as the data hasn\u2019t changed in months (even if the news has). And the stock market always, eventually, relies on facts and data.<\/p>\n

Michael Foster is the Lead Research Analyst for <\/em>Contrarian Outlook<\/em>. For more great income ideas, click here for our latest report \u201c<\/em>Indestructible Income: 5 Bargain Funds with Steady 10.2% Dividends.<\/em>\u201d<\/em><\/p>\n

Disclosure: none<\/em><\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

What happened to the stock-market rally? Simple: it\u2019s been undermined by two overdone fears: of a housing-market correction and worries around a government shutdown. But well reported-on events like these rarely have the big impact most people think they do. In fact, this pullback in stocks is a buying opportunity, particularly in high-yield closed-end funds […]<\/p>\n","protected":false},"author":1,"featured_media":68191,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-68190","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-markets","tag-featured"],"yoast_head":"\nThe September Stock Slide Is Serving Up Big Bargain Dividends | iFintechWorld<\/title>\n<meta name=\"description\" content=\"What happened to the stock-market rally? 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