The Fed’s Rate Cuts: Why Bond Proxies Are Back in Play for Income Seekers

There’s a classic saying on Wall Street: “Don’t Fight The Fed!” The advice is pretty solid. Essentially, the central bank’s path on interest rates dictates how you should adjust your portfolio. There’s no reason to go against the herd. In fact, doing so could provide plenty of underperformance.

And right now, the Fed is starting to say look elsewhere to find yield.

With interest rates declining, bond proxies—that is, high-paying dividend stocks—are starting to outperform. Certain sectors and tax structures naturally pay higher dividends. These so-called bond proxies have started to provide a high total return for investors. In not fighting the Fed, the bond proxies are back.