The Fed is reducing support for the yield trade (QE ends October) and will start raising cash rates in 2015. Your portfolio needs to be positioned ahead of that event. Markets move in anticipation and you can’t wait for the “fact” here.
This is a major trend change event and, in my view, the beginning of the end of the outperformance of the yield trade. You only have to look at the Australian dollar for guidance to this starting.
You don’t need more banks
On the 29th of April this year, I downgraded the Australian bank sector to “hold” (neutral) on the basis that our long-held FY14 5.00%FF yield-based share price targets had been hit or exceeded. That day proved to be the top for ANZ ($35.07), NAB ($36.00) and WBC ($35.99) for the year to date. CBA did trade slightly higher into its FY14 result/div, but is now lower and has cracked the multi-year technical uptrend (chart below).