The Federal Reserve’s interest rate increases to lower inflationary pressure could drive the economy into a recession in the near term. The stronger-than-expected May jobs report increases the chances of more interest rate hikes. This, along with continuing geopolitical headwinds, has kept the stock market highly volatile. The CBOE Volatility Index (VIX) has gained 51.5% year-to-date, reflecting significant market volatility. After witnessing a moderate slowdown in inflation in April, investors are awaiting the Consumer Price Index (CPI) data for May, which is scheduled for release this week, to gauge how things stand macroeconomically.
Because the stock market is expected to remain under pressure in the coming months, it could be wise to bet on high-yield but reasonably priced dividend stocks to generate a steady income stream and with capital appreciation potential. Investors’ interest in high-yield value stocks is evident in the AAM S&P 500 High Dividend Value ETF’s (SPDV) 1.3% returns over the past month versus SPDR S&P 500 Trust ETF’s (SPY) 1.4% loss.
