“Even though we don’t think they are going to go up dramatically, and this may come as a little bit of a surprise, interest rates are the biggest risk for us,” he said, speaking earlier this week at the annual Expert Investor Iceland forum.
“All investors have enjoyed this tailwind of interest rates going down for the past 30 years which has benefited bond and equity markets. If that tailwind goes away, maybe some of this disappears,” he explained.
Especially some high-dividend paying stocks may be at risk because the disappearance of this ‘interest rate dividend’, since the continuously declining interest rates have enabled them to successfully pose as stable quality stocks, the American argued. “So you need to prepare for this change by finding businesses that can do well in every environment.”
Whether Iceland’s investors will heed Woodard’s advice is the question, of course. They have traditionally had a preference for value stocks, which typically do not do well in every environment. However, if there’s one sector that will benefit from higher interest rates, it will be financials. The interest rate race to the bottom has ensured banks and most insurance companies are now firmly in the value bucket.
Click here to see a slideshow of photos taken at Expert Investor Iceland.
And here you can see a full overview of delegate voting results from the event.