When Money
moves from Big Cap dividend paying value stocks to Big Cap Growth stocks, it
causes a slowdown in the price performance of dividend paying stocks. However
Growth stocks do not start to move up immediately. There is a wait period
before money starts to move into Big Cap growth stocks and during this wait period
stock prices fall.
The length of
the wait period determines how long the correction or “basing” will last. The
depth of the correction will depend on how much money moves out of Big Cap
Dividend Paying stocks. At some point when prices of Dividend Paying stocks falls
to a point that the yields are very attractive again, money will stop flowing
out from them. So in dividend paying stocks there is a backstop on how far the
prices can fall.
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