The Market Rallies on the End of Fed Rate Hikes
Things are looking up in the market. The S&P 500 soared 3.5% last week and is now more than 7% higher YTD.
Investors love that the banking issues have had the benefit of tempering the Fed with no apparent offsetting crisis, so far. The expected timeline for the Fed to stop raising rates has moved way up, to one more rate hike from what could have been a hiking cycle that lasted the rest of the year.
The market is rallying for now. And this rally might last a while longer. But we’re not out of the woods yet. Banking issues may not be over. The timing and severity of a possible recession are still unknown. And many see the market pricing in rate cuts before the end of this year, which I believe is unlikely.
Sure, inflation has come all the way down to 6% from a high of 9.1%. But it is still a long, long way from the Fed’s 2% target rate. History is abundant with evidence that you can’t take your foot off the neck of inflation until it’s truly dead, or else it just comes back again in the next recovery. The Fed knows this and doesn’t want a decade-long mess, partially of their own making.
A recession could bring down inflation fast and cause the Fed to ease sooner. But we might not get a recession. And a recovery may be quite subdued as the Fed will likely be much more reluctant than in the past to lower rates aggressively. We could get stagflation.
We still have inflation, the possibility of recession or perhaps stagflation ahead. But all these scenarios boost the relative performance of dividend stocks and income investments. Stocks are basking in the glory of the ending of rate hikes for now. And a continuing rally should create great covered call writing opportunities in the weeks ahead.
Trades This Month
March 7th
Sell QCOM March 31st $130 calls at $7.00 – Remove
March 14th
Medical Properties Trust - Rating change “BUY” to “HOLD”
March 17th
V March 17th $220 calls at $12.00 - Expired
March 21st
SOLD - Medical Properties Trust, Inc. (MPW) - $7.89
March 28th
Purchased ONEOK, Inc. (OKE) - $60.98
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.3%
After going nowhere since the fall, the infrastructure juggernaut is finally busting a move. It’s up over 5% in the last ten days and is at its highest price since last fall. Operating performance was strong all along, but the stock was under some pressure because of the strong dollar, which diminished overseas earnings, and high interest rates, as debt cost increase. But both interest rates and the dollar are moving lower. The stock is well below the 52-week high made last April but it still has very resilient earnings, a great track record, and a safe dividend. BUY
Global Ship Lease, Inc. (GSL)
Yield: 8.1%
The container shipping company pulled back over the past couple months after soaring to the highest price since last Spring. GSL has often pulled back like this in the past after a price surge. But it’s still up over 14% YTD. Earnings were strong and the company should continue to benefit from the opening of the Chinese economy in the months ahead. The longer-term supply/demand dynamic is positive for container shipping and the stocks may be in a longer-term bull market. GSL still sells at a cheap valuation. HOLD
Intel Corp, (INTC)
Yield: 1.9%
Things are certainly looking up for this beleaguered stock. INTC soared over 30% in the month of March and has broken out to the highest level since last summer. Part of it is a rally off the bottom as the stock sunk to book value after lousy earnings and guidance and a dividend cut. Intel is still a powerful industry player and its recent attempts to catch up to its competitors should succeed to a least some degree over time.
But there has also been good news recently. It announced the earlier-than-expected release of its new CPU chip for data centers. Production problems had been an issue, but it looks like that is being overcome and bodes well for the many high-growth chips in the works. It should also help boost earnings sooner than expected. HOLD
ONEOK, Inc. (OKE)
Yield: 6.0%
This midstream energy stock had been pulled down in the wake of the banking situation. OKE pulled back below 60 per share. But the selling was likely overdone because this company continues to post strong earnings and is well-suited to endure inflation and/or recession. The stock has already popped back above 65 per share and should be poised to move still higher. BUY
Realty Income Corp. (O)
Yield: 4.8%
The legendary income REIT is also recovering from a bout of weakness for similar reasons. Things are solid as the REIT grew profits by 9.2% year over year, added $9 billion in new properties for the year and reported the highest occupancy rate in the last 20 years at 99%. This is a popular and defensive income stock that should hold its own with inflation and in the event of a slowing economy or recession. HOLD
Star Bulk Carriers Corp. (SBLK)
Yield: 24.6%
Like GSL, SBLK has gotten new life this year. SBLK moved up a lot in February despite it being a tough month for the overall market. The shipping company pulled back in March, which is not unusual for this stock after a surge. It is benefiting from more Chinese traffic as the country opens again. Lower shipping rates and a slower global economy have already been factored into the stock and it is likely still the early innings of a multiyear positive cycle for shipping. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.3%
This is a great longer-term stock of a company with a huge share of mobile 5G chips and strong exposure to some of the fastest-growing areas in technology. Meanwhile, it sells at a very cheap valuation by historical standards. QCOM has been pushed around by the sector since it’s been under pressure but there has been new life lately. Inflation is coming down and interest rates are falling, and technology is the best-performing sector YTD with the group up over 20%. At some point this year, the market should start sniffing out the recovery. And QCOM can make up for lost time fast when it moves. HOLD
Visa Inc. (V)
Yield: 0.8%
V is tied to the fortunes of the more cyclical stocks in the near term. But it tends to outperform that group. It held up nicely in a very tough 2022 with a -3.4% return for the year, it’s up 25% since the September low, and it has a positive return YTD. Of course, it could be under pressure if the economic situation deteriorates. But the stock is still relatively cheap and it should fly when the market eventually senses the end of this cycle and the next recovery. HOLD
The Williams Companies, Inc.
Yield: 6.2%
Although Williams reported solid earnings last quarter with 21% full-year growth over 2021, the company expects slower growth of just 3% in 2023 as the benefit of recent acquisitions draws tougher comparisons. But the dividend is rock solid with 2.37 times coverage from cash flow and future growth is likely to resume at a stronger clip in the years ahead. The stock is currently selling near the 52-week low and is a bargain considering the dividend yield and earnings resilience. BUY
| CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $127.58 | NA | 2.35% | -1.33% |
| Visa Inc. | V | 12/22/21 | $217.96 | $225.46 | NA | 0.80% | 4.44% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $18.74 | NA | 8.10% | -18.79% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $21.12 | NA | 24.65% | -22.17% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $32.67 | NA | 1.53% | -15.74% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $29.86 | $38.00 | 5.99% | -12.53% |
| Brookfield Infrastructure Cp. | BIPC | 11/9/22 | $42.43 | $46.06 | $46.00 | 3.32% | 10.37% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | 63,54 | $63.00 | 6.01% | 4.20% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| as of close on 3/31/2023 | |||||||
| SOLD STOCKS | |||||||
| Security | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price | Total Return |
| Innovative Industrial Props. | IIPR | Called | 6/2/20 | $87.82 | 9/18/20 | $100.00 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95.00 | 7.30% |
| U.S. Bancorp | USB | Called | 7/22/20 | $36.26 | 9/18/20 | $38 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | $41.92 | 10/16/20 | $45 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/20 | $82.41 | 10/16/20 | $88 | 6.18% |
| Visa Corporation | V | Called | 9/22/20 | $200.56 | 11/20/20 | $200 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/20 | $91.04 | 12/31/20 | $100 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | $18.14 | 1/15/21 | $20 | 15.16% |
| Altria Group | MO | Called | 6/2/20 | $39.66 | 1/15/21 | $40 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/20 | $44.68 | 1/15/21 | $45 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/20 | $26.79 | 2/19/21 | $28 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/20 | $53.70 | 3/26/21 | $60 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/20 | $85.69 | 4/1/21 | $96 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/21 | $47.98 | 6/18/21 | $55 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/21 | $149.17 | 7/16/21 | $155 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/21 | $73.76 | 9/17/21 | $80 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | $50.63 | 10/15/21 | $55 | 11.65% |
| AGNC Investment Corp | AGNC | Sold | 1/13/21 | $15.52 | 1/19/22 | $15 | 5.92% |
| ONEOK, Inc. | OKE | Called | 5/26/21 | $52.51 | 2/18/22 | $60 | 19.62% |
| KKR & Co. | KKR | Sold | 8/25/21 | $64.52 | 2/23/22 | $58 | -9.73% |
| Valero Energy Inc. | VLO | Called | 11/17/21 | $73.45 | 2/25/22 | $83 | 15.53% |
| U.S Bancorp | USB | Sold | 3/24/21 | $53.47 | 4/13/22 | $51 | -1.59% |
| Enterprise Product Ptnrs | EPD | Called | 3/17/21 | $23.21 | 4/14.2022 | $24 | 11.25% |
| FS KKR Capital Corp. | FSK | Called | 10/27/21 | $22.01 | 4/14/22 | $23 | 13.58% |
| Xcel Energy Inc. | XEL | Called | 10/12/21 | $63.00 | 5/20/22 | $70 | 12.66% |
| Innovative Industrial Props. | IIPR | Sold | 3/23/22 | $196.31 | 7/20/22 | $93 | -51.23% |
| One Liberty Properties | OLP | Sold | 7/28/21 | $30.37 | 8/24/22 | $25 | -12.94% |
| ONEOK, Inc. | OKE | Called | 5/25/22 | $65.14 | 1/20/23 | $65 | 2.66% |
| Xcel Energy, Inc. | XEL | Called | 10/26/22 | $62.57 | 1/20//2023 | $65 | 4.67% |
| Realty Income Corp. | O | Called | 9/28/22 | $60.37 | 2/17/23 | $63 | 5.41% |
| Medical Properties Trust | MPW | Sold | 1/24/23 | $13.22 | 3/21/23 | $8 | -38.00% |
| EXPIRED OPTIONS | |||||||
| Security | In/out money | Sell Date | Sell Price | Exp. Date | $ Return | Total % Return | |
| IIPR Jul 17 $95 call | out-of money | 6/3/20 | $3.00 | 7/17/20 | $3.00 | 3.40% | |
| MO Jul 31 $42 call | out-of-money | 6/17/20 | $1.60 | 7/31/20 | $1.60 | 4.03% | |
| ABBV Sep 18 $100 call | out-of-money | 7/15/20 | $4.60 | 9/18/20 | $4.60 | 5.05% | |
| IIPR Sep 18 $100 call | in-the-money | 7/22/20 | $5.00 | 9/18/20 | $5.00 | 5.69% | |
| QCOM Sep 18 $95 call | in-the-money | 6/24/20 | $4.30 | 9/18/20 | $4.30 | 4.82% | |
| USB Sep 18 $37.50 call | in-the-money | 7/22/20 | $2.00 | 9/18/20 | $2.00 | 5.52% | |
| BIP Oct 16 $45 call | in-the-money | 9/2/20 | $1.95 | 10/16/20 | $1.95 | 4.65% | |
| SBUX Oct 16 $87.50 call | in-the-money | 10/16/20 | $3.30 | 10/16/20 | $3.30 | 4.00% | |
| V Nov 20 $200 call | in-the-money | 9/22/20 | $10.00 | 11/20/20 | $10.00 | 4.99% | |
| ABBV Dec 31 $100 call | in-the-money | 11/18/20 | $3.30 | 12/31/20 | $3.30 | 3.62% | |
| EPD Jan 15 $20 call | in-the-money | 11/23/20 | $0.80 | 1/15/21 | $0.80 | 4.41% | |
| MO Jan 15 $40 call | in-the-money | 11/25/20 | $1.90 | 1/15/21 | $1.90 | 4.79% | |
| USB Jan 15 $45 call | in-the-money | 11/25/20 | $2.00 | 1/15/21 | $2.00 | 4.48% | |
| BGS Feb 19 $27.50 call | in-the-money | 12/11/20 | $2.40 | 2/19/21 | $2.40 | 8.96% | |
| VLO Mar 26 $60 call | in-the-money | 2/10/21 | $6.50 | 3/26/21 | $6.50 | 12.10% | |
| CVX Apr 1 $95.50 call | in-the-money | 2/19/21 | $4.30 | 4/1/21 | $4.30 | 5.02% | |
| AGNC Jun 18 $17 call | out-of-money | 4/13/21 | $0.50 | 6/18/21 | $0.50 | 3.21% | |
| KKR Jun 18 $55 call | in-the-money | 4/28/21 | $3.00 | 6/18/21 | $3.00 | 6.25% | |
| USB Jun 16 $57.50 call | out-of-money | 4/28/21 | $2.80 | 6/18/21 | $2.80 | 5.24% | |
| DLR Jul 16 $155 call | in-the-money | 6/16/21 | $8.00 | 7/16/21 | $8.00 | 5.36% | |
| AGNC Aug 20 $17 call | out-of-money | 6/23/21 | $0.50 | 8/20/21 | $0.50 | 3.00% | |
| OKE Aug 20 $57.50 call | out-of-money | 6/23/21 | $3.50 | 8/20/21 | $3.50 | 6.67% | |
| NEE Sep 17 $80 call | in-the-money | 8/11/21 | $3.50 | 9/17/21 | $3.50 | 4.75% | |
| BIP Oct 15 $55 call | in-the-money | 9./01/2021 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24.2021 | $2.30 | 11/19.2021 | $2.30 | 4.30% | |
| OKE Nov 26 $65 call | out-of-money | 10/20/21 | $2.25 | 11/26/21 | $2.25 | 4.28% | |
| KKR Dec 17 $75 call | out-of-money | 10/26/21 | $3.50 | 12/17/21 | $3.50 | 5.42% | |
| QCOM Jan 21 $185 Call | out-of-money | 11/30/21 | $9.65 | 1/21/22 | $9.65 | 7.17% | |
| OLP Feb 18 $35 Call | out-of-money | 11/19/21 | $1.50 | 2/18/22 | $1.50 | 4.94% | |
| OKE Feb 18 $60 Call | in-the-money | 1/5/22 | $2.75 | 2/18/22 | $2.75 | 5.24% | |
| USB Feb 25 $61 call | out-of-money | 1/13/22 | $2.50 | 2/25/22 | $2.50 | 4.68% | |
| VLO Feb 25 $83 call | in-the-money | 1/18/22 | $4.20 | 2/25/22 | $4.20 | 6.13% | |
| EPD Apr 14th $24 call | in-the-money | 3/2/22 | $1.25 | 4/14/22 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/22 | $0.90 | 4/14/22 | $0.90 | 4.09% | |
| XEL May 20th $70 call | in-the-money | 3/30/22 | $3.00 | 5/20/22 | $3.00 | 4.76% | |
| SBLK July 15th $134 call | out-of-money | 6/1/22 | $1.60 | 7/15/22 | $1.60 | 4.80% | |
| OKE Oct 21st $65 call | out-of-money | 8/24/22 | $3.40 | 10/21/22 | $3.40 | 5.22% | |
| OKE Jan 20th $65 call | In-the-money | 11/25/22 | $3.70 | 1/20/23 | $3.70 | 5.68% | |
| XEL Jan 20th $65 call | in-the-money | 11/25/22 | $5.00 | 1/20/23 | $5.00 | 7.99% | |
| O Feb 17th $62.50 call | in-the-money | 12/28/22 | $3.00 | 2/17/23 | $3.00 | 4.97% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20.2022 | $11.75 | 9/16/22 | 11.75 | 8.73% | |
| V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/203 | $12.00 | 5.51% | |