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Luciano Siracusano, WisdomTree chief investment strategist, on how investors can prepare their portfolios for the end result of the fiscal cliff talks...
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-- Washington scrambles to avoid the fiscal -- investors are waiting to find out what their portfolio.
It's gonna look like on January 1 -- -- had a crystal ball I would tell you believe me but investors could get hit.
With higher dividend taxes my next guest says don't worry -- enjoyment out of Fox Business exclusive is -- on the -- on health with -- chief investment strategist a lovely Italian.
-- thank you I'd say this as a Casone.
Can you -- -- -- -- on that you're not -- you're you're telling your clients not to worry but.
Many people are worried and they're they're trying to balance the portfolios now to get ready for the end of the year.
Police say.
I say we may not know what's gonna happen until the end of the year and I think people need to take some solace what was seen historically when taxes go up.
What happens to the markets what happens to the performance of dividend stocks when the taxes on dividends you know increase.
That but that's the thing with you we've seen especially in the day after the election it was a flight away from dividend paying stocks I mean it is Harris is -- sub -- panera -- That you like you would recommend that can protect us.
-- -- not a lot of places to hide because about it 88% of the return of the S&P 500 today is driven by dividend paying stocks and dividend paying stocks basically part of the market.
But I think the way to think about it is what happened the last time rates went up on dividend stocks have happened President Clinton came in off.
-- rates went from 31% to top rate was 39 point six.
What happened to the market over the next ten years to -- about nine point 3% per year.
So the macro environment is much more important tax mark.
In fact when President Bush lowered the tax rate to 15%.
In 2003.
The annualized returns for the next decade through yesterday six point 3% per year.
Do you making the point that 40% of returns are taxi investors -- and aren't for the long haul we're going long term.
And then also you're also making the point that at the same time -- ain't got -- income disparity -- -- -- talking about 20215 above.
But that does it mean.
It's a great point there's about a trillion dollars in quote retirement assets which really aren't sensitive to rates.
And so if the dividend stocks were sold down because of taxes there's a lot of people who going to buy them because they might be undervalued and -- take advantage of it.
-- the other point I think is important.
Is about 40%.
Of the folks who are collecting qualified dividends every year as a family make less than a quarter million dollars a year.
So President Obama gets his way and keeps rates as they are.
For 90% of the population.
They won't be impacted you are rates going up on you.
Like high yield investments I mean you like high yielding stocks.
I know that you -- have -- -- ATF they're recommending to us but at the same time my concern that high yield is generally quit with.
A valuable I value company good choice as far as the stock goes -- -- how do you I don't think -- about.
You get the high yield if you're getting high yield because you picking three -- four stocks to have high yields that's a hybrid strategy if you're getting your yield by owning several hundred companies.
Inside of the -- yeah.
With a high yield that's a very different proposition all right so any TS specifically do have a specific ETF that you like the year really kind of geared towards -- now.
Well I call wisdom tree tea that's OK here are -- -- more specific and we don't we don't recommend any one particular one but I know a lot of our advisors.
We have been looking at higher yielding part of the markets they're looking at US large cap.
-- who quality portfolios with yields that are north of where the S and he has said he can get a broadly diversified US large cap basket paying you least 3%.
That's terrific in an environment for treasuries only paying about one point six.
What about small caps I mean it it seems that it with small businesses small caps.
Through this kind of there's -- -- Canada bias against them right now.
Yeah typically small caps -- -- -- -- coming out of recession when there's demand I think need to have a stronger growth rate in the US who have can get a pick up.
Personal income job creation because most of these small caps are not gonna benefit from what's going on international.
You know where is -- we've seen that we were looking it -- I -- I was fascinated to look to watch how different sectors would be performing until -- sector.
-- -- a couple of weeks how many percent taken a huge.
Had surprising because so many people love utility sect that they -- sector utilities because they think they'll say.
Gotta keep the power on is always nice dividend.
They're also on the don't know they also take a lot of flack if you can achieve your financial area and sometimes people respond to what's in the headlines that's not always the best investment strategy.
I would think if you're looking for long term you know three to five years out utilities did very well last year not so good this year a lot of times best time to buy into an asset class -- Afterwards -- -- little bit -- -- not regulation until this sector right now in the -- coming because of the storm signal issues that we -- in the northeast it's possible.
Well we're gonna have more with you coming up later on the show and -- -- you've got some other investment ideas.
Not in the United States emerging markets -- my favorite topics so we'll see you just a law that great are.
What -- another generation we now have 49 minutes ago.
You know I don't saying lots of more.
Airlines are taken -- -- hard on one of the busiest travel days of the year plus.
