Rising Stock Prices Mask Looming Dangers in the Economy

The yield on the benchmark 10-year US Treasury bond recently shot up to 2.3 percent, breaking a near 8-month long trading range.

Investors are reallocating money out of safe-haven investments such as US Treasuries, while a more optimistic outlook for US economic growth is driving speculation that the Federal Reserve will hike rates sooner than expected.

However, investors are reading far too much into the recent improvement in economic conditions. Almost three years into the economic expansion, US government bond yields still hover near all-time lows, the economy is growing at a moribund 2 percent to 3 percent annualized pace, and unemployment remains above 8 percent. These factors continue to suggest that significant risks persist.

These are the conclusions of investment analyst, Elliott Gue’s, latest market commentary for his investment advisory service, Personal Finance.

“In the second half of last year, I argued that investors were far too pessimistic and that predictions of a US economic recession were premature, setting up stocks for a major rally. But after the recent run-up in the broader market, I’m now arguing the opposite: Investors are pricing in a return to robust economic growth and a rapid fall in unemployment. A more likely scenario: The US economy continues its slow recovery, punctuated by short-lived accelerations and slowdowns,” stated Elliott Gue.

“It’s not time to panic and sell out your holdings, but you need to protect your downside. I recommend taking profits in high-beta names and reallocate proceeds to more income oriented names. One sector I am particularly bullish on is the Master Limited Partnership (MLP) sector, which offers investors reliable and high-yielding distributions,” added Gue.

MLPs are limited partnerships (LPs) that trade on the major exchanges and can be purchased through any discount or full-service broker. Unlike regular corporations, MLPs don’t pay any corporate-level tax. Instead, MLP investmentspass through the majority of their income to investors in the form of regular quarterly distributions.

Investors can learn more about Master Limited Partnerships by accessing Elliott Gue’s free MLPs Investments report at: http://www.investingdaily.com/glp/31305/Master-Limited-Partnerships-Best-MLPs-to-Own-Now.html