By Justin Turner CIM, DMS®, CFP®
Could Janet Yellen be even more dovish than her predecessor Ben Bernanke? After a week of relatively sideways markets, stocks moved up on Thursday as investors embraced signs sent by Yellen that the Fed would continue its monetary stimulus.
Riskier assets such as gold and emerging market stocks saw especially strong moves. Yellen’s hearing before the Senate Banking Committee made it clear that she is going to continue the policies currently in place. With markets now less concerned with the Fed’s withdrawal of stimulus in the near term; the market could see a substantial rally to close out the year, especially in the riskier or interest rate sensitive sectors. The S&P seems poised to test the 1800 level, something most would have found virtually impossible this time last year.
With markets at these lofty levels, we think that selling covered calls could be a good strategy to generate income while lowering downside in the event of a market correction.
