- Increasing interest rates make earnings growth unlikely and increase the probability for a decline of the S&P 500.
- To beat the S&P 500, you have to invest in sectors that offer a better risk reward ratio than the S&P 500.
Don’t Go For 10 To 20 Percent Returns In 2017
With the S&P 500 yielding 3.85% going into 2017, stocks in general are currently an investment vehicle that gives you a small and limited upside with a potentially large downside.
We know that the FED plans to raise interest rates another three times in 2017. If that happens, the investments people consider most secure—like treasuries, dividend paying blue-chips or REITs—will be hit the hardest because as required yields go up, their asset prices will go down. Therefore, the best way to prepare for 2017 is to position yourself so that if the FED raises rates, your upside is far bigger than 3.85% and your downside far smaller than the potential downside of the currently overvalued stock market. More →