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Having read Charlie Aitken’s report under “Don’t Fight The Fed, I don’t understand what he means by “It’s now time to start positioning your portfolio for…. the unwinding of the yield trade”. Does he mean that SMSF trustees should reduce their investments in high yielding equities in favour of increasing investments in growth? If that’s the case, how should a retiree that needs income to live off tackle this re-balancing please? If a retiree has investments in managed funds, how should they (i.e. the retiree) perform this “unwinding of the yield trade”? Do they sell out of managed funds and LICs?
A: In relation to your assessment of the "unwinding of the yield trade", you are correct in thinking that yield based stocks are unlikely to deliver material capital growth going forward. Income focussed investors shouldn't be impacted from an "income" point of view.
If you are investing through LICs or managed funds, then your managers may or may not reposition. This will depend on whether they agree with this assessment, and also, their investment mandate.
