Now that the primaries for both US political parties are over, it is time for investors to begin to evaluate the likely tax change scenarios under the new government that will soon be installed.

All signs are that taxes will rise, but how much and in what ways will differ depending on who is president and which party controls the House and the Senate.

None of the changes are likely to be favorable to investors in general.  Accordingly, there will probably be shifts in what is more or less attractive to investors, with resulting changes in money flow and returns for types of investments.  Company behavior may change as well.

For example, dividends are a case in point.  After the tax laws changed to reduce taxes on dividends, equity income became more popular, several high-yield funds were launched, and companies increased dividend payouts.

If dividends taxes are increased, there may be a shift toward

Large banks are way down in the past 12 months, and as a consequence their trailing yields are well above normal.  That potentially creates substantial long-term equity income opportunity, but the big question is whether the dividends that make those yields will hold or be cut.

If you subscribe to the “buy it when it’s cheap” philosophy, then you really need to evaluate any sector when it sinks the way large banks have done.

If you conclude that taking a position (partial or full) in large banks is the right thing to do, we believe that you should buy the sector, not individual banks (unless you have high research-based conviction about the individual company).

If you buy the sector, you are exposed to systematic risk for banks (general market risk and industry specific risk, such as more mortgage market trouble).  You would probably hold …

Large banks are way down in the past 12 months, and as a consequence their trailing yields are well above normal.  That potentially creates substantial long-term equity income opportunity, but the big question is whether the dividends that make those yields will hold or be cut. 

If you subscribe to the “buy it when it’s cheap” philosophy, then you really need to evaluate any sector when it sinks the way large banks have done.

If you conclude that taking a position (partial or full) in large banks is the right thing to do, we believe that you should buy the sector, not individual banks (unless you have high research-based conviction about the individual company).

If you buy the sector, you are exposed to systematic risk for banks (general market risk and industry specific risk, such as more mortgage market trouble).  You would probably hold some stinkers in the group, but you would also hold