It's difficult to find good income opportunities in the bond market right now. The 10-year Treasury, which was yielding more than 3% last fall, is heading into this fall at 1.7%. That's even less than the rate of inflation.

As my clients' bonds mature, I'm advising them to consider some other opportunities with more attractive yields. One is an old standby – high-quality dividend-paying stocks. I look for stocks with rising dividends above the 10-year Treasury rate. Owning such stocks allows you to take advantage of price appreciation, but also to get paid while you wait.

It's true that the trade war and other pressures could hit companies' profits and force them to freeze or lower dividends. The key is to analyze and identify companies that are poised to continue growing their dividend payments over the long term.

Three dividend stocks that are worth a look right now are Discover Financial Services, which is yielding 2.1% and up 42% this year; Western Union, yielding 3.4% and up 41%, and Hawaiian Airlines' holding company, which is yielding 1.7% and up nearly 4%.

For something that may be completely different, income hunters might consider investing directly in real estate. Drawing on my own experience as a residential and commercial landlord, I wrote about real estate's pros and cons here

Owning and managing real estate properties is a longer-term commitment because it's obviously harder to sell a building than it is to sell a stock or bond. But if you do it right, it's reasonable to expect a 6% or 7% net profit year in and year out.

Finally, there's the opportunity to earn a solid yield with instruments called non-agency residential mortgage-backed securities. Specifically, I like RMBS that are backed by non-conforming loans. These pay higher yields – currently between 4% and 7% with duration under 5 years. The range is based on several variables, including prepayments and defaults of the underlying mortgages, as well as projected valuations of defaulted properties.

Non-agency RMBS can also be bought at a discount to their original price, which may increase the yield. The key is having the knowledge to track down opportunities that are discounted but also are high-enough credit quality to avoid a default.

So while bonds aren't a very encouraging place to be right now, fixed-income investors shouldn't lose hope. If you'd like to discuss the best way to add yield opportunities to your investment portfolio, don't hesitate to contact us.

Over the past couple of weeks, there's been a lot of talk about the trade war with China, stock market volatility, and the possibility of a recession.

In this blog we'll look at what's behind all the headlines, and how you might respond as an investor. The spoiler is this: There's no need to panic, but it's increasingly necessary to be thoughtful and selective in choosing stocks.

Here's some of the backstory. A day after the Federal Reserve's July 31 announcement that it was cutting interest rates for the first time since 2008,
President Trump announced additional new tariffs on a huge range of imported goods from China.

Within a few days, China let its currency, the yuan, fall to its lowest value since 2008. That prompted the U.S. Treasury Department to label China a "currency manipulator." Market watchers are concerned about the effect on stocks of the trade war and of a possible currency war. And they point to recession indicators such as the "inverted yield curve."

A recession, which could create a significant market impact, is no sure thing however. Jobless claims are very low, wage growth is decent, and corporate earnings are still pretty good as well. If a recession does end up occurring, I believe it will be a mild one, because the economy hasn't seen the type of distortions that led to the dot-com and housing busts. For that reason, a bear market also seems unlikely.

Still, the stock market is likely to be very volatile for the foreseeable future, and certain types of companies will be hurt by the trade war with China. Those facing pressure include big-box retail companies: Because of tariffs, they'll have to jack up prices or accept lower profits. Agricultural and tech companies will probably suffer as well, for similar reasons.

On the other hand, selected financial technology firms like PayPal and payment processors Discover and American Express are worth a look. With incomes on the rise, travel and leisure companies, as well as airlines, could also be good bets.

There's always a way to make money in stock market, whether it's a roaring bull market or a grinding bear market -- or anything in between. What's going on right now is that the broad, easy gains that investors collected in the first several years of the recovery are gone. Going forward, you'll have to dig into the research to find companies that are poised to do well. If you'd like to talk about your investments, don't hesitate to give us a call.

The Federal Reserve is signaling that it's ready to cut interest rates, in an effort to protect the U.S. economy from a global slowdown in economic growth.

Lower interest rates are a classic tool the Fed uses to prop up the economy when it's struggling. But it may be too late to prevent a recession.

This may seem surprising, since the stock market has been surging and continuing to set new records. It's gotten an extra boost from the anticipated Fed rate cuts. But the bond market, which is far larger than the stock market, tells a different story.

Investors have been piling into long-maturity bonds as a safe haven from what they see as weak economic performance ahead. The New York Fed's recession prediction model, which is based on the behavior of the bond market, is spiking. Its June reading jumped to 32.88, up from 28 in May. Since 1960, every time that index has breached 30, a recession has followed. According to the gauge, there's a strong chance of a recession within the next 12 months.

The reason the Fed's coming rate cuts won't help is that they're late to the party. In making its policy decisions, the Fed uses backward-looking data—such as last month's employment growth. While it's studying that data, consumers may be starting to cut back on spending, employers may be starting to hire fewer people, and so on.

What does a projected recession mean for stocks? If the forecast is true, investors will realize before long that stocks are overpriced. It'll become particularly clear if companies start missing their projected earnings for this quarter. Investors will start selling, and a correction could ensue—perhaps chopping 10% or more off the S&P 500. The stock market is a leading indicator of recessions, meaning that it will react to an economic downturn before it occurs, usually six months out or so.

As always, it's important to keep things in perspective and not overreact. Experts say that the next recession would be mild compared with the preceding ones in 2001 and 2008. The pain of those recessions was amplified by runaway mortgage lending and dot-com mania. We haven't seen those kinds of excesses in this expansion cycle.

It's always important to remember that there is always a way to make money, whether markets are headed up or down. Now could be the time to sell some of your winners and buy quality stocks that haven't performed as well but could benefit from any turbulence ahead. Doing that could help protect you from a market selloff, but also position you to do well once stocks rebound.

Finally, a correction would probably be a pause that refreshes in what has been a long-term bull market in U.S. stocks. Now is the time to make thoughtful, confident decisions. Don't hesitate to contact us if you'd like to do a review of your investments.

Real estate is often peddled as a get-rich-quick investment—and that lures some people in, and it turns some others off.

The truth about real estate is that, like stocks and bonds, it can be a solid investment as long as you do your research and have clear expectations. I've owned residential and commercial rental properties for years, and I've sold properties as well. I'm often asked for advice on the subject, including my thoughts on real estate's pros and cons.

Let's start with the pros. One attractive aspect of real estate investing is that it's leveragable: Banks will lend you money at good rates and high loan-to-value percentages against real estate. And that means you can get a lot of exposure with relatively little up-front cash.

You could finance $400,000 or a $500,000 property, for example. That's something you can't do with stocks: In the latter case, a lender might only allow you $150,000 on $100,000 of stocks.

The takeaway is that real estate's leverage nature dramatically increases its potential for both risk and reward as an investment. For example, a 10% return on that $500,000 property is $50,000 (minus borrowing costs). But if you have a negative return on your real estate investment, that's amplified by the leverage.

Investment real estate also involves two major tax advantages: the ability to deduct all expenses and to depreciate the asset. The result is that the taxable income winds up being lower than the actual income.

What about the cons? One drawback is real estate's illiquidity. You'll always be able to sell your shares of a blue-chip stock instantly. But many a real estate investor has been caught in a declining market, leveraged up to their eyeballs and unable to find a buyer for a property whose repair costs are adding up. Worse, your loan might be due; you're unable to refinance because your loan is underwater, and you can't find a buyer to take the property off your hands.

Owning rental real estate can be a large commitment of your time and energy. I don't buy a property unless I can gross more than 12% or 14%, and earn a net profit hopefully above 6% or 7%. Plan on doing a lot of the minor repairs yourself in order to keep expenses down and maximize your profit.

A few words of advice potential real-estate investors. First, always make sure to have an "out." For the reasons explained above, you want to be able to sell a property when necessary. So before buying, think about how to ensure there will likely be a market for your property. For example, I decided to buy a house in the Nashville area that is near high-rise condominiums with limited parking. In that case, I'm betting that the folks in those condos will eventually want to move up into a more comfortable situation that is nearby. They are some of the potential buyers for my property.

I'd also recommend that you make sure any house you buy to renovate and resell has plenty of easy "comps." It might sound enticing to fix up a big, old house and find an appreciative buyer. But in practice, it's often difficult to sell such a property, because there's little basis for determining a fair price. Better to buy a house that's surrounded by plenty of others that are similar to it.

It's also a good practice to seek out properties that seem likely to rise in value because of an outside, driving event or trend. Examples might be a home in a so-so area that is set to improve because the city or town is planning to invest in the area. When municipalities build sports and entertainment arenas, for instance, blighted property that's held down home prices is often removed in the process. Or maybe the neighborhood is heading into a good cycle, where homeowners are tearing down old houses and building new ones.

One final point about real estate: Don't put all your eggs in this basket. Smart investors diversify across different asset classes in order to hedge the risk of any one of them crashing. And remember that real estate, because of the loan leverage, is a high-stakes game. It can make or break you, and takes a lot of patience.

Please don't hesitate to get in touch if you'd like to discuss real estate or other types of investments.

The recent breakdown in trade negotiations between the U.S. and China, followed by President Trump jacking up tariffs, spooked the stock market—sending the S&P 500 down 2.5% May 6 through 9. In a nutshell, the market had become too complacent, assuming that a trade deal would happen and ignoring the risk that talks would run off the tracks.

Our countries' trade dispute needs to be settled, both for reasons of fairness and because the old saying—nobody wins a trade war—is true. I believe it's most likely that the parties will ultimately reach an agreement. The tariffs, the rhetoric and the posturing on both sides are calculated attempts to gain leverage that can be translated into bargaining power.

Both China and the U.S. need a deal, if only for political reasons. President Trump has signaled that he will run for re-election in 2020. He'd spin any agreement into a win for the U.S. and use it to gain support.

Chinese president Xi Jinping is presiding over a fragile economy, one that continues to be weakened by the trade war. By contrast, the U.S. economy continues to be strong. Translation: the heat is on Xi to get a deal done, while Trump can afford to be patient and hold a hard line—which is why he increased to 25% tariffs on $200 billion of Chinese goods on Friday.

A deal will get done, I believe, and China will make sacrifices to secure it because it needs the American consumer to buy its exports. Once a deal is struck, sectors that sold off over trade fears, including industrials and technology, should rally.

For investors, the key is to avoid panicking and making impulsive decisions. Ignore the posturing and the heated rhetoric. Stocks will always have good days and bad days. But in the end, they've historically rewarded those investors who have exercised patience.