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Why Are Interest Rates Rising?

by Mark Rieger, Mark Rieger Realty

Below is a CNNMoney article explaining why interest rates are moving upward. For those of you who have been watching this happen and were wondering why, this information should help straighten that out. I hope you find the information helpful.

Stocks had been more attractive than bonds with long-term rates so low. But that may be changing.

NEW YORK (CNNMoney)

Investors have been pulling money out of stocks that pay high dividends lately and putting it into shares of companies that stand to benefit from the economic recovery.

The shift is a significant change from earlier this year when investors were piling into dividend-paying stocks in response to historically low yields in the bond market.

But the yield on the 10-year Treasury note recently rose above the average dividend yield paid by companies in the S&P 500 for the first time in just over a year. The 10-year yield hit a high of 2.2% this week, up from an all-time low of 1.4% last July, as investors brace for a slowdown in the Federal Reserve's bond buying campaign. The S&P 500's dividend yield is 1.98%.

The rise in bond yields triggered a big move out of defensive sectors of the stock market, which typically include companies that pay high dividends, such as utilities, telecommunications firms and real estate investment trusts.

For example, the ETF that tracks utilities, the Utilities Select Sector SPDR Fund (XLU), is down 7% so far this month, while the S&P 500 is on track to gain about 5%.

"All of the safe-haven sectors have been underperforming," said David Lutz, head ETF trader at Stifel Nicolaus. "The defensive stocks have been overwhelmed by the rotation away from yield."

Related: Best deals in investing

While rising bond yields make dividend stocks less attractive, the shift also reflects investors' increased appetite for risk, said JJ Kinahan, chief derivatives strategist at TD Ameritrade.

"Investors had been chasing yield, now they are chasing capital gains," said Kinahan.

Related: Is bond bubble losing air?

It's the economy. Phil Orlando, chief equity market strategist with Federated Investors, said the move out of dividend stocks suggests that investors are looking forward to a rebound in economic activity during the second half of the year.

He said the rally earlier this year was led by defensive stocks because investors were worried that misguided fiscal policies in Washington would hurt the economy. But he said those concerns are beginning to fade and investors are now boosting their exposure to stocks that typically rise along with the economic cycle.

"Investors are beginning to price in an improving economic recovery," said Orlando. "We think that's a trend that that has legs."

Related: Bond gurus say Treasuries are still safe

Orlando pointed to a number of sectors that had been beaten down earlier in the year and are now finding favor as the economy strengthens, including energy, industrials, consumer discretionary and select technology companies. But the financial services sector has been the main beneficiary so far.

Tips for Spring Gardening

by Mark Rieger, Mark Rieger Realty

While you have most likely already started your Spring gardening, here are 5 gardening tips that aren’t too late for you to try to make your garden even better this year.

 

1. Use vegetable water for your plants. The next time you boil or steam vegetables, don't pour the water down the drain. Instead, use it to water potted plants after letting it cool to room temperature. There are many vitamins and nutrients in vegetable water that plants love.

 

2. Use eggshells as fertilizer. Rich in calcium carbonate, dried egg shells work as a great natural fertilizer. Crush them up in a blender before throwing them in your garden to enrich the soil.

 

3. Spread mulch mid-Spring. Now that your young plants have taken root and are taller and stronger, give them a nutrition boost. Spread mulch around the roots to keep them healthy and to encourage them to grow.

 

4. Resist Over-planting. Only plant what you will use. You don’t have to plant all the seeds in every packet. Just start small, and go from there.

 

5. Get rid of pests. If you don’t detect pests early and allow them to make a home in your garden, they will be much more difficult to control later on and can do a lot of damage to your plants. Look through the garden frequently to identify pests, and eliminate them as soon as you see them.

 

There's nothing better than home grown vegetables. I hope you found some of these tips helpful.

 

If you or anyone you know is in need of professional real estate assistance in central Oregon, whether you're looking to Buy or to Sell, just let me know. I'm here to help!

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