The economy is showing positive signs according to three key economic statistics that suggest it is a great time to buy stocks. These statistics include American incomes continuing to grow, savings rates being at their highest level ever, and the potential for the Fed to cut rates, directing more savings into high-yielding closed-end funds (CEFs). CEFs with yields of over 8% are seen as a better investment option in this current economic environment.
American incomes are on the rise, with GDP per capita increasing and average American salaries growing by 5.6% in 2023. This growth is above the historical average rate and indicates sustainable economic progress. Additionally, savings rates are also increasing, with a significant amount of cash being held in money-market funds. This increase in savings is expected to prompt more Americans to seek higher-paying investment options when interest rates are lowered.
CEFs are seen as a viable option for investors looking to replace income lost from lower interest rates and traditional investments. With average yields of 8%, CEFs can provide a significant income boost compared to other investment options such as the S&P 500. One example is the Nuveen Multi-Asset Income Fund (NMAI), which offers a dividend yield of 13.8% and is diversified across various asset classes.
NMAI’s diversified approach makes it an attractive option for income-seeking investors as it covers emerging markets, corporate bonds, blue chip stocks, mortgage bonds, and real estate investment trusts (REITs). As interest rates fall, more investors may turn to CEFs like NMAI for income and diversification. The increasing interest in CEFs is also reflected in the narrowing of discounts to net asset value (NAV) for funds like NMAI.
While not all households may invest in CEFs like NMAI, there is a growing interest among US investors in high-yielding funds as they seek to maximize their income potential. Some investors, including members of the CEF Insider service, have been using CEFs to maintain financial independence for years, and their knowledge and position in the market may benefit from increased interest in these funds.
Overall, the current economic environment presents opportunities for investors to explore high-yielding investment options like CEFs to capitalize on growing incomes, increasing savings rates, and potential rate cuts by the Fed. By understanding and leveraging these economic trends, investors can position themselves to benefit from the income-generating potential of CEFs in the current market conditions.
