7 Trillion Reasons Why Stocks Will Surge: 3 Dividend Stocks to Buy Now

Stocks, particularly dividend stocks, are expected to surge due to $7 trillion in funds parked in money-market funds set to be invested. The government's deficit and higher Treasury yields are causing concern, but Treasury Secretary Scott Bessent is focusing on the long end of the yield curve, cutting demand for short-term debt and driving up the long bond's price. Meanwhile, the Fed has stepped up monthly bond buying, dragging down bond yields. Three dividend stocks to consider are Bessent, Jay Powell, and the 10-year Treasury rate.

Stocks, particularly dividend stocks, are poised for a significant surge as a substantial portion of the $7 trillion parked in money-market funds is set to be reinvested. This shift is driven by a combination of factors, including the government's growing deficit and the anticipated rise in Treasury yields. However, the focus on the long end of the yield curve by Treasury Secretary Scott Bessent, coupled with the Federal Reserve's increased bond buying, is likely to mitigate some of these concerns.

The Money-Market Funds Trigger

The $7 trillion in money-market funds has been a source of concern for investors, but recent trends suggest that a portion of this capital is about to be redirected into dividend-paying stocks. The current "wall of worry" includes fears about the government's exploding deficit and the potential for higher interest rates. However, these concerns may be overblown, and the market's fears could be misplaced.

Treasury Secretary Bessent's Focus

Treasury Secretary Scott Bessent has been focusing on the long end of the yield curve, which is set by the 10-year Treasury rate. This strategy involves cutting demand for short-term debt, driving up the price of long bonds, and reducing their yields. This approach is part of a broader effort to manage the government's debt problem.

Federal Reserve's Role

While Bessent has been focusing on the long end of the yield curve, the Federal Reserve has been quietly stepping up its monthly bond buying by $20 billion. This move further drags down bond yields, providing an additional buffer against rising interest rates. The Fed's actions are part of its broader effort to support the economy and prevent a recession.

Three Dividend Stocks to Watch

Given the expected shift in capital from money-market funds to dividend stocks, several companies are poised to benefit. Three notable dividend stocks to consider are:

1. Nuveen Quality Municipal Income Fund (NAD): This closed-end fund offers a 4.9% discount to its net asset value (NAV) and provides an 8.1% dividend yield. Municipal bonds issued by state and local governments are tax-free for most Americans, making this fund an attractive option for income investors.

2. Dominion Energy (D): This utility company offers a 4.9% yield and is poised to benefit from the expected decline in interest rates. Dominion's forward price-to-earnings ratio is well below its five-year average, indicating that the stock is undervalued.

3. Union Pacific (UNP): While this company offers a lower yield of 2.4%, it is well-positioned to benefit from the expected easing of trade tensions and the potential renegotiation of the USMCA. UNP's dividend payout is overdue for a turnaround, and lower interest rates could drive further growth.

Conclusion

The expected surge in dividend stocks is driven by a combination of factors, including the $7 trillion in money-market funds set to be reinvested and the strategic focus on the long end of the yield curve by Treasury Secretary Scott Bessent. The Federal Reserve's increased bond buying further supports this trend. Investors should closely monitor the three dividend stocks mentioned above, as they are well-positioned to benefit from this shift in capital.

References:

[1] Contrarian Outlook. (2025). 7 Trillion Reasons Why Stocks Will Surge and 3 Dividends to Buy Now. Retrieved from https://contrarianoutlook.com/7-trillion-reasons-why-stocks-will-surge-and-3-dividends-to-buy-now/

[2] AZ Big Media. (2025). A Complete Guide on the Top Highest Dividend Stocks to Watch and Invest. Retrieved from https://azbigmedia.com/business/a-complete-guide-on-the-top-highest-dividend-stocks-to-watch-and-invest/