SCHD And SPY: You Need To Look At This Chart To See Why SCHD Will Outperform

(11min)

Summary

  • SCHD's excess CAPE yield relative to SPY is at the highest level in at least a decade.
  • This is a strong – and more reliable - signal in my view that SCHD’s yield is too cheaply valued when benchmarked against the overall equity market.
  • It also prompts me to upgrade SCHD to a strong buy rating.
  • As for SPY, I think the market is overestimating the odds of a soft-landing scenario by ruling out the possibility of a rate increase in the next 1~2 years.
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SCHD and SPY ETF: new catalysts and chart of the day

I last wrote about the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) a bit more than a month ago. In that article, entitled "SCHD Vs. VYM: This Chart Shows It's Time

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This article was written by

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Sensor Unlimited is an economist by training with a PhD, with a focus on financial economics. She is a quantitative modeler and for the past decade she has been covering the mortgage market, commercial market, and the banking industry. She writes about asset allocation and ETFs, particularly those related to the overall market, bonds, banking and financial sectors, and housing markets.

Sensor Unlimited contributes to the investing group Envision Early Retirement which is led by Sensor Unlimited. They offer proven solutions to generate both high income and high growth with isolated risks through dynamic asset allocation. Features include: two model portfolios - one for short-term survival/withdrawal and one for aggressive long-term growth, direct access via chat to discuss ideas, monthly updates on all holdings, tax discussions, and ticker critiques by request. Learn More.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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