Inflation is still above the Federal Reserve’s 2% target despite easing. While interest rates are not expected to increase further this year, given a robust employment market, the likelihood of an interest rate cut is improbable.
Given the market’s uncertainties, investing in Vanguard High Dividend Yield Index ETF (VYM – Get Rating) could be wise, as it can cushion your portfolio against market volatility and help generate a steady income stream.
The July consumer price index (CPI) rose 3.2% year-over-year, slightly accelerating from June’s 3% annual increase. A price rise of 0.2% month-over-month in July adheres perfectly to the economist forecasts. However, PPI, which measures wholesale prices, rose 0.8% annually, higher than the forecasted 0.7% increase and outpacing June’s upwardly revised increase of 0.2%.
According to the CME FedWatch Tool, markets are pricing about an 89% probability of a rate hike pause, despite these contradictory strands of data. Some experts advocate for this freeze in rate hikes, while others project the contrary, anticipating potential rate hikes in the coming months.
BMO Family Office’s Chief Investment Officer, Carol Schleif, predicts the Fed to hold rates steady in September, but the robust job market could provide the Fed enough flexibility for another round of hikes.
Amid apparent ongoing volatility, VYM, which provides investors access to dividend-paying large-cap companies, could be a wise investment for generating a steady income stream.
The ETF has gained 5.4% over the past three months and 2.1% over the past month to close its last trading session at $108.87. It has a 24-month beta of 0.74, indicating lesser volatility than the overall market.
Here are the factors that could influence VYM’s performance in the upcoming months…
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