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Robust retail sales, fueling concerns over interest rates and increasing risks of further bank downgrades, suggest that market volatility will persist in the foreseeable future. Given this backdrop, investing in Vanguard High Dividend Yield Index ETF (VYM – Get Rating) could serve as a buffer against market instability while ensuring a consistent income stream.
The July consumer price index (CPI) rose 3.2% year-over-year, accelerating from June’s 3% annual increase. Additionally, the PPI, measuring wholesale prices, escalated 0.8% annually, surpassing the projected 0.7% rise and outpacing June’s upwardly revised increase of 0.2%. Also, monthly wages swelled 0.4%, culminating in a 4.4% year-over-year rise, beating the forecasts.
July’s retail sales rose 0.7% from the prior month, surpassing Wall Street’s 0.4% estimate. This underscores the persistent resilience of American consumers.
Furthermore, Fitch slashed the U.S. government’s credit rating by citing downward pressure on the country’s sovereign debt rating, regulatory gaps centered on “monetary policy normalization,” and the uncertain outlook for interest rates. Moody’s had also downgraded the credit ratings of 10 U.S. banks in August while alerting major lenders of potential downgrades.
The difficulty of bringing inflation down to the Fed’s 2% target rate persists despite last year’s easing. BMO Capital Markets’ senior economist, Sal Guatieri, said, “Still, a move to lower the current target range of 5.25%-5.50% is unlikely to begin until about June 2024 given the expected sluggish path of inflation back to the target.”
Amid ongoing volatility, large-cap companies typically offer stability and predictable cash flows and display less volatility than medium and small-cap companies. In times like these, VYM, a fund offering investor access to dividends-paying large-cap companies, can provide a reliable investment option facilitating a steady income flow.
The ETF has gained…
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