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Sam Stovall: Here's How Stocks Will React To Rising Interest Rates
So short-term Treasuries will be 25 bps higher at some point this year. That is not the reason some dividend stocks have had a pullback. The reason is they had a tremendous year in 2014. AEP was up 34%. So it's down about 4% YTD. But not because interest rates might creep up 25 bps. Its P/E got to almost 17. Time for a breather, but hardly a reason to sell a solid stock with a yield of 3.56% for what might be 2.4% on a ten-yr Treasury.
@BobC, you may be right that AEP needed a breather, but the stock lost approx. 4% on the day of the jobs report when thoughts about interest rates were changing. I don't think you can reasonably argue that the pullback that day, and possibly the continued pullback in subsequent days had nothing to do with interest rate expectations. I also don't think that means anyone needs to sell stocks they feel are good investments, but I think the point of the article was that if you've invested in those higher yielding S&P 500 stocks for the dividend income then its important to be aware of the capital risk as well.
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