Global equities are in the process of recovering from the post-Brexit turmoil. The Dow Jones index is within striking distance of the 18,000-level yet again while the UK's FTSE 100 index is on pace for its best weekly performance in years.
On the other hand, CNN Money's Paul LaMonica cautioned investors that buying into the post-Brexit rally hype is a mistake.
LaMonica pointed out government bond yields offered by major governments worldwide are still lower than they were a week ago.
Meanwhile, the FTSE 250 index, which focuses more on the domestic British economy, is trading notably lower by more than 800 points Friday than it was pre-Brexit vote.
U.S. Federal Reserve In Focus
The U.S. Federal Reserve has been keeping a very close eye on the Brexit vote and market volatile that followed. As such, a rate hike is likely "on hold for the foreseeable future."
For that reason, LaMonica continued, investors could benefit from investing in defensive stocks that pay high dividends. For example, food and beverages, tobacco, utilities and telecom stocks all offer dividend yields that are more attractive than most government debts.
"Consumer staples have been oversold on Brexit," LaMonica quoted Chuck Self, chief investment strategist of iSectors, an ETF strategy firm as saying. "People are going to drink. People are going to smoke. The big dividend payers are going to be fine."
Bottom line, the Brexit vote is a historic first of its kind and "there is still so much that we don't know."
"It's scary that momentum loving equity and stodgy fixed income investors are both bullish," LaMonica concluded.
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