While listed as stocks, “preferred” shares are a hybrid between stocks and bonds. They provide a fixed dividend that takes priority over payouts on common stock. At the same time, they are highly sensitive to interest rates like bonds, i.e., as rates rise, prices generally fall, and vice versa. As such, the conventional thinking approaching the likely Fed rate hike in mid-December was that preferred stocks would suffer along with other higher yielding instruments that serve as competition for low-rate fixed income securities. Indeed, in the days leading up to the Fed meeting, preferred stocks sold off sharply as an impending rate hike became more apparent.
Then a funny thing happened. After the rate hike occurred, preferred stocks began to rally. And the development has even gone somewhat beyond the “sell the rumor, buy the news” stage at this point. Judging by ...
/www.benzinga.com/general/education/15/12/6077871/lyons-counter-intuitive-investing-is-the-preferred-way alt=Lyons: Counter-Intuitive Investing Is The 'Preferred' Way>Full story available on Benzinga.com
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