How Is High-Yield Doing Now?

Mar. 10, 2025

In case you didn’t know, the stock market has been tanking lately.

Many experts have been calling for a massive fall, and now it’s coming true. Some predictions are two years late, but okay.

Question: Did you nail a market crash prediction if it doesn’t happen until years later?

Anyway, the market’s been falling and it probably will continue for a while.

How bad is it?

Here’s the SPY on a Daily chart:

Ouch, it looks bad since the top in February. Here are those numbers:

While it looks bad, the SPY has only dropped about 6.5%. Not terrible.

And it’s also only come down to its 200-day SMA. That’s still bullish by any technical metric.

So, as always, the losses feel worse than they are.

At the same time, high-yield has taken a beating lately–which isn’t surprising. If the market goes down, high-yield goes down, too.

The problem is: high-yield goes down way faster than SPY does.

And no matter how many Newsletters you read or videos you watch, nothing can make you comfortable if you’re not comfortable watching 6-10% drops in a single day.

Further, these big drops in the highest of high-yielders can play havoc with margin. If you’ve taken margin all the way to the absolute limit, 90%-100%, the dividends won’t pay enough to pay off all of the drops in price.

The dividends will get you out of an immediate margin call, of course, but it won’t take you completely out of trouble.

So, people looking to scream, “I told you so!” are gleefully warming up their vocal cords.

But let’s stay calm and take a look.

Let’s say you got excited and wanted to try high-yield. And let’s say you went for only the ones who paid out the most: TSLY, ULTY, MSTY, and NVDY.

We have data on those going back to March 2024, over a year. Some go back farther but all 4 have results since March 2024.

And here’s the chart on that portfolio of four high-yielders:

Oh boy. Look at that huge drop since mid-February! It’s all a huge failure!

Now wait a second. Isn’t the blue line far above the SPY line? And doesn’t that mean this portfolio is killing the market?

Here are those numbers:

If you reinvested, this portfolio is more than doubling the market over the past year.

Even with the big recent drop.

As hard as it is to believe, high-yield can be used to beat the market, not just for income.

And think about this. If you did want all the income, yes, the ETFs went down in price.

But the income received has almost paid off the entire $10k investment from a year ago!

This portfolio has thrown off $7,700 in about a year. In a few more months, the investment will become risk-free.

And the income payments will still be coming in indefinitely.

Nobody loves a drawdown.

And no one can prepare us for the anxiety of a lot of down days.

But the high-yield numbers still look pretty darn good.

We’ll keep an eye on it.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.