August income investor dashboard

It’s time again for the monthly update of the income investor dashboard. July was an exciting month with stocks dropping in general, bonds defying the consensus chorus and rallying, and volatility spiking higher. Below is the updated income investor dashboard.

As usual the highlighted green cells are for those areas that became less expensive, higher yields, during the month. The broad stock averages dropped about 1-2% for the month and the dividend ETFs did even poorer, dropping 2.5% to 3.5%. Some of the dividend ETFs, like IDV are starting to look interesting. What’s important to note is that the broad averages are testing their 200 day moving averages, a key support indicator, and some of the dividend ETFs have broken below the 200 day moving average. A lot of tactical allocation programs are keyed on the 200 day moving average so often a strong break below this level indicates more selling pressure to come. Of course, a strong bounce back to the 50 day or shorter moving averages would be a positive sign.

In the individual sectors, REM and IYZ really took it in the chin this month. These sector ETFs are particularly concentrated in their top holdings which can make for some big moves. Also, surprisingly to me, IYR, the real estate ETF continues to hold up really strong. This sector is very expensive by historical standards but has strong momentum right now. REM and especially some of the individual mREITs are looking interesting. Watch for NLY earnings this week.

Then there are bonds. How much can a one sector be hated more? Looking for positive bond commentary seems to be like looking for a needle in a haystack. And yet bonds continue to do very well defying most expectations. Bonds outperformed across the board with the long term treasury ETF, TLT, doing the best. For you income traders TLT continues to be a great income generating vehicle via the leveraged covered call strategy I’ve posted on before. One last thing about bonds. Despite what you read in most of the financial media bonds are still drawing in investors. Look at the last 5 weeks of mutual fund flows below.

Strong performance given the environment of the debt ceiling debate, potential downgrade of US debt etc….Bonds are responding more to the slow economy and a fundamental secular demand for more income producing assets than any of the short term hype. I expect this to continue as long as the economy remains sluggish which will most likely be for some time.

That’s about all for this month. If anyone has any questions please post them in the comments.