If this wobbly market has you parked on the sidelines, worrying the big 2019 rally might evaporate at any second, I have good news: this is still a great time to buy.
But you need to buy carefully if we want to maximize our upside (and protect ourselves from a 2008-style meltdown).
Top-quality closed-end funds (CEFs) handing you dividend cash that more than doubles (and in many cases more than triples) what your typical S&P 500 stock pays. I’ll give you three solid CEF picks (selling at fire-sale prices up to 23% off) at the end of this article.
These three bargain funds give you a great setup, no matter what happens with this trade-obsessed market: if stocks do pull a 2008 repeat, these CEFs’ huge discounts will limit their downside. And if stocks rip higher, investors will pile into these three absurdly cheap deals, lighting a fire under their share prices.
Either way, you’ll still collect these CEFs’ outsized dividend payouts, with yields up to 6.9%!
And despite the worrying headlines we’re seeing these days, I still see plenty more upside in this market. Let’s dive into why.
Earnings Are Down—and That’s Good News
Here’s the strange thing about the first-quarter earnings season (which, behind all the breathless headlines about tariffs and interest rates, is still rolling along): earnings are down 0.8%.
Let me explain why this small piece of (seemingly bad) news is actually a win in disguise.
Analysts went into the quarter expecting S&P 500 profits to fall 3.9%. But then those expectations were upgraded again (and again), until they narrowed to 0.8%. With about 20% of S&P 500 companies yet to report, we could actually wind up with profits higher than a year ago.
If you want to see why earnings were expected to fall at all, just look back to 2018.
In the first quarter of that year, corporate profits surged 25%. That’s obviously unsustainable, yet 25% growth continued in the second quarter and was nearly as high in the second half of 2018.
In short, 2018 was one of the strongest earnings years in history—and it was also the year that stocks saw their first bear market in a decade.
I spotted this “earnings-up, stocks-down” disconnect in late 2018, when I recommended that investors move into the then-oversold market. Here’s how stocks have performed since 2019 kicked off:
Stocks Catch Up to Profits