Fed, shmed! This red-hot trade could keep working — no matter what the Fed does

The trade in high dividend-yielding stocks is alive and well, no matter what the Federal Reserve does about interest rates, according to two experts.

"Unless interest rates are going to move 150 to 200 basis points quickly, I actually think that the flow will maintain some relative performance here," despite "blown-out" valuations, Tim Seymour of Triogem Asset Management said Wednesday on CNBC's "Power Lunch." He was referring to high-dividend stocks like Kellogg's, Coca Cola, Clorox and General Mills.

The Fed will not take the dividend trade "out of the market," Seymour predicted.

After raising short-term rate targets in December, the Fed has kept rates on hold. The market, and perhaps the Fed itself, is now divided over whether the central bank will hike once again before the year is out.

While the Fed meeting minutes released Wednesday appeared to make a hike in the next few months look a bit less likely, the jury is still very much out.

"I think what we've seen over the last six weeks isn't this change in the Fed — it went from a probability of 30 percent to be raising 25 basis points to somewhere around 50 percent; now, that's not a huge move," said Stacey Gilbert, head of derivative strategy at Susquehanna.

"I think some of this rotation that we saw with this underperformance in utilities and telecom was a rotation to a more risk-on type of environment," said Gilbert on "Power Lunch."

Though Gilbert has observed a shift to risk-on trades for some high-yield technology names and emerging market bonds — a departure from traditionally safe havens like consumer staples, utilities and telecom — she does not see investors making a "mass exodus" from more defensive sectors.

So far this year, the telecom and utilities sectors, which have the highest dividend yields in the S&P 500, have led the market with 17.2 percent and 15.5 percent rallies, respectively.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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