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‘A first interest-rate hike by the Fed might well be a non-event’Should investors in low-vol strategies fear the rate hike? No, says Van Vliet. “A first interest-rate hike by the Fed might well be a non-event. It’s not only the direction of interest rates, but also their absolute level that counts. If the fed funds rate goes up to 0.25% or 0.50%, that hardly makes a 3% dividend yield on stocks look less attractive.” Over the past 90 years the dividend yield has been lower than interest rates most of the time. At the moment we’re far away from that situation. “But historically, it is normal for stock dividends to be lower than interest rates”, Van Vliet adds.
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