Certain sectors usually are negatively affected by rate hikes, such as utilities and financials, though we believe there are companies in those sectors that can successfully sustain through a difficult rate environment. High-yielding dividend stocks can also be vulnerable to interest rate increases, as they are often used as fixed income proxies, so we believe our focus on dividend growth rather than simply yield is favorable in this environment.
Subset of S&P 500 and MSCI World Index, All rate hikes since May 31, 1994 (3/25/97, 6/30/99, 6/30/04)
Data source: Ned Davis Research, Inc. Further distribution prohibited without prior permission. Copyright 2016 © Ned Davis Research, Inc. All rights reserved. Past performance is no guarantee of future results. The rate hikes listed above reflect the date of the first rate hike of a tightening cycle. A tightening cycle is defined as three consecutive rates hikes without a cut and is only known retrospectively. The performance shown reflects the average combined performance of each S&P 500 Index and MSCI World category, as defined by Ned Davis Research, Inc., for the 36 months following the first rate hike in each tightening cycle. Performance returns may have been negative during this time period. The periods shown do not represent the full history of the S&P 500 Index or the MSCI World Index; the data provided reflects the history maintained by the source. High dividend growers include those companies that comprise the top 20% of dividend growth in both the S&P 500 & MSCI World Indexes. High dividend yielders include those companies that comprise the top 20% of dividend yield in the S&P 500 and MSCI World Indexes. Different benchmarks, economic periods, methodologies and market conditions will produce different results. There is no assurance that any asset class or index will provide positive performance over time. Indices are unmanaged and unavailable for direct investment.
This information should not be relied upon as investment advice, recommendations, offers or solicitation of any particular security, asset class, fund, strategy, or investment product. Investing entails risk, including the possible loss of principal. There can be no assurance that any investment or asset class will provide positive performance over any period of time. Dividend yield is one component of performance and should not be the only consideration for investment. Dividends are not guaranteed and will fluctuate. Equity investments such as large-cap stocks are subject to market risk or the risk of decline in response to adverse company news, industry developments, or a general economic decline. Investments in small- and mid-cap companies are subject to greater volatility. Non-U.S. investing presents additional risks such as the potential for adverse political, currency, economic, social or regulatory developments in a country including lack of liquidity, excessive taxation, and differing legal and accounting standards. Past performance does not guarantee future results.
The statements contained herein reflect the opinions of Santa Barbara Asset Management, LLC (“Santa Barbara”) as of the date written. Certain statements are forward looking and/or based on current expectations, projections, and information currently available to Santa Barbara. Such statements may or may not be accurate over the long-term. While we believe we have a reasonable basis for our comments and we have confidence in our opinions, actual results may differ from those we anticipate. We cannot assure future results and disclaim any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. Statistical data was taken from sources which we deem to be reliable, but their accuracy cannot be guaranteed.
Santa Barbara Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen, LLC.