Trump’s Economic Shift Presents Strong Dividend Opportunities

Currently, it is clear that Trump 2.0 significantly differs from Trump 1.0. Among the notable changes—which has received limited attention—is a promising tailwind for two key dividend stocks we will explore today.

Reflecting back on Trump’s earlier presidency, his turbulent relationship with Federal Reserve Chairman Jay Powell was well-documented. In 2018, Trump criticized Powell and the Fed via Twitter, expressing his dissatisfaction with their decisions to keep interest rates high. A year later, he labeled Powell as an “enemy.” Clearly, it created a challenging atmosphere for Powell, who likely longed for a tranquil evening without notifications.

In contrast, the current tone has significantly mellowed. Though Trump occasionally critiques Powell, he has stated his intent to allow Powell to finish his term, which extends until May 2026. After the Fed opted to maintain steady rates earlier this February, Trump commended the decision as “the right thing to do.”

Shifting Focus from Short to Long Rates

What accounts for this transformation?

A major factor is Treasury Secretary Scott Bessent’s focus on the 10-year Treasury rate, the long end of the yield curve, rather than the short end, which is influenced by the Fed. This shift has largely escaped media scrutiny but holds significant implications for dividend stocks.

Bessent has expressed his intention to lower “long” interest rates, thereby reducing borrowing costs for consumers and businesses. His strategy encompasses three essential components:

• Drilling: Aims to decrease energy costs.
• Deregulation: Intended to lower operational costs and boost productivity.

Adding to the favorable environment for long rates is a cooling labor market, partially linked to the ongoing developments around cryptocurrency. Evidence of this shift is apparent, with layoff notices surging by 245% in February compared to January, reaching levels not seen since June 2020, as reported by the outplacement firm Challenger, Gray & Christmas.

The 10-year Treasury yield has indeed responded, showing a marked decline since Bessent’s appointment despite recent volatility related to tariffs:

10-Year Takes Its Cue From Bessent …

This shift in economic dynamics is not solely the result of Bessent’s approach; indicators point to a slowing economy, including the Atlanta Fed’s GDPNow forecast, which anticipates a 2.8% decrease in annualized growth for Q1. The narrative that soaring tariffs would result in “permanent inflation” appears increasingly unfounded. A quicker transition to lower rates—both from the Fed and the 10-year Treasury—seems more plausible than many currently believe.

As interest rates decrease, the appeal of bonds and related investment assets rises. This trend is already observable in my Contrarian Income portfolio, with assets such as the PIMCO Dynamic Income Fund (PDI) receiving heightened attention as returns improve.

… And So Does This Core CIR Holding

This closed-end fund, managed by Dan Ivascyn—widely referred to as “the Beast”—focuses on corporate bonds and delivers a noteworthy 13% yield that is anticipated to gain further traction as interest rates fall. With PDI distributing monthly dividends, this asset remains a dependable investment.

Investors Cannot Ignore PDI’s Steady 13% Dividend Amidst Falling Rates

Source: Income Calendar

However, a word of caution is in order: PDI currently trades at a premium over its net asset value (NAV), prompting us to advise against new purchases at this time (refer here for updates on when this could change).

Meanwhile, other “bond proxies” are likely to benefit from declining rates, particularly utility stocks. Many of these stocks have stalled since Bessent’s appointment, creating opportunities for investment where there is still room for growth.

Take Dominion Energy (D) as an example, serving 4.5 million power customers across 13 states while offering a yield of 4.9%. Unlike PDI, Dominion’s stock price has remained relatively flat even as the 10-year Treasury yield experienced a decline:

Dominion’s Disconnect Presents a Buying Opportunity

It is important to note that Virginia has become a significant area for the data-center boom, which supports ongoing AI advancements.

Revisiting the earlier discussion on DeepSeek, while it may seem like a distant memory, the underlying reality remains the same: the demand for energy from AI-driven platforms, such as chatbots, is likely to rise. Consequently, our investment in electricity remains a critical story moving forward.

In addition, ChatGPT has recently released its latest version, ChatGPT 4.5, which utilizes more extensive data for training, introduces new features—including a more conversational interface—and increases its computing demands even further.