Yield is Still King
When Bernanke first used the words that he will keep interest rates low for an extended period of time back in 2009, nearly everyone was arguing that meant months not years. I argued that it meant exactly that, extended as in years. Eventually Bernanke was forced to actually put a minimum target date to stop all the bantering.
Now he has mentioned that eventually the Fed will scale back on the QE (I purposefully avoided using the term tapering). He, mistakenly, gave a "for instance" which threw all the modeling by others out the window. So now all we hear every single darn day is "so what do you think tapering will begin?" Yet "tapering" only means a withdrawal by the Fed from buying 2 asset classes (MBSs and TBills) over a period of time which is data dependent.
There is the rub. Data dependent. So if things suck purchases will continue and if things improve on a sustainable level, no need for the purchases. This does not mean that interest rates will rise dramatically. They have short term as a result of over reaction to Bernanke's comments, but they aren't going double digits.
I submit that "tapering" has now been baked into interest rates. New models have now been put in place. Real Estate is about three words: location, location, location. Interest rates are about three words now: demographics, demographics, demographics.
First, retiring boomers will buy bonds more than any other asset class. They will do so because they simply cannot afford to lose money since they are too old to make up the losses.
Second, retiring boomers will spend less. Since odds are they will now be on fixed budgets, discretionary spending will be curtailed.
Third, since spending is 70% of GDP that means downward pressure on it.
Aside from possibly Larry Summers and die hard Kludlowites, who in their right mind would want to raise interest rates in any earnest in light of the preceding. The Fed rate isn't going up anytime soon.
Tbills will still be bought in earnest. Banks will start giving mortgages because Dodd-Frank is limiting how they can make money.
So if you can buy equities that yield 5%+ they will still be worth buying. Buy those dips on yield because yield is still king.