Last week at the San Francisco MoneyShow I did a joint, dividend stock focused presentation with Kelley Wright of Investment Quality Trends. Here is an excerpt from the MoneyShow description of the event:

“Dividends and dividend growth have historically accounted for the lion’s share of stock total returns. Moreover, companies that are rapidly growing their payouts can be found in some of the fastest-growing sectors of the economy. This gives rise to a largely underutilized strategy: ‘Stealth growth’ investing, which centers around buying quality stocks with a penchant for dividend growth.”

IQ Trends method tracks stocks between historic yields. Buy when the yield is near the high of the range and sell when the yield touches the low of the historic range. Each stock will have its own yield history. This is a very value oriented stock market strategy and the stocks he follow can go for years without hitting a buy or sell signal. The strategy works because the service only recommends growing dividends stocks. This means as the dividend grows and if the share price stays in the historic yield range, the share price must be appreciating.

While he didn’t go deeply into individual stocks Wright did give some quick hits on shares his system shows as undervalued. Here are several:

The Walt Disney Company (NYSE: DIS) has a historic yield range of 0.8% to 1.6%. The current yield is 1.5%, which under the IQ Trends system is a strong indicator that DIS is undervalued and should move higher from here.

Wright labeled CVS Health Corporation (NYSE: CVS) and Philip Morris International Inc. (NYSE: PM) as “screaming buys”. He also discussed his belief in the large cap energy companies stating he owned a “boatload” of Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX).

I personally like the contrarian value approach of Wright and his IQ Trends approach. He and I both use dividend yields and dividend growth as tools to help us find stocks that provide long term positive returns for investors.

More: 3 High Growth Dividend Stocks Paying Over 6%

During my portion of the presentation, I shared a handful of stocks I thought income investors should take a strong look at. My difference is that I often recommend newer companies. Under the IQ Trends system, stocks must have a 25 year dividend history. I like to find and recommend newer stocks with high yields and potential for dividend growth in the early years, on top of those yields.

Here’s one of the more recent ones I’ve unearthed:

PermRock Royalty Trust (NYSE: PRT) is a new investment I revealed to the presentation attendees. This is not a company, but instead the trust has a right to 75% of the net income from crude oil production from dedicated acreage in the Permian Basin.

PRT pays a variable, monthly dividend based on the prices received for sold crude oil and natural gas. I describe PermRock as a pure play, high yield way to participate in crude oil prices.

I believe that oil will continue to go higher, resulting in a higher share price and larger dividend payments. However, the latest dividend was lower, causing a share price drop, making PRT very attractive.

I expect PRT to yield between 8% and the mid-teens.

The markets took the news that two of President Trump’s former staffers had been found guilty of several crimes in stride Wednesday. Though the news has been fodder for the pundits, thus far the markets have focused more on a great earnings quarter. Indices are daily flirting with new highs. News that a NAFTA deal with Mexico may be imminent, and the start of trade negotiations with China, are not hurting this juggernaut of a market either.

Thursday the market will see earnings from Alibaba (BABA) before the open, and the heavy retail earnings week continues after the close when Gap (GPS) reports. Alibaba is expected to give a good report on its core business, but those earnings are being overshadowed by spending to expand in bricks-and-mortar retail. Given the blowout earnings from companies like Target (TGT) and Walmart (WMT) investors may be in a forgiving mood to see the Chinese company putting more effort into physical stores. Inventory issues hampered Gap in the first quarter, but analysts expect those issues to be resolved this quarter. After great numbers from other retailers, Gap is expected to deliver an upbeat report. Analysts will be looking for continued strength in the Old Navy brand, as store openings have accelerated due to strong demand.

Thursday’s economic calendar is heavily loaded with the FHFA House Price Index and new home sales data released in the morning. Prices were down and supply was up in June, which analysts believe will bode well for the July report, after buyers have been reporting a dearth of available inventory. Both numbers are expected to rise slightly. Also released on Thursday are weekly jobless claims and the PMI Flash Index. The PMI number has been running up against capacity constraints, and analysts will be listening for anecdotal information from the flash number which is released 10 days before the final report. Thursday also marks the beginning of the Jackson Hole Annual Economic Symposium which often brings market moving commentary from its participants. Durable goods orders will be released Friday morning. The street is expecting a pullback in orders overall, but this is due to a dip in aircraft numbers. Ex-transportation analysts are expecting a .5% increase.

As it is a late Friday in August, only six companies are reporting earnings Friday morning. Among the group are Foot Locker (FL) and Hibbett Sports (HIBB). Analysts are looking for a continuation of improving numbers at the retail shoe chain. Foot Locker has been benefiting from an improved product offering mix from big names like Nike (NKE). FL is not expected to slip as its comeback continues. Although same-store sales and earnings dipped slightly at Hibbett last quarter, the small-town sports store is expected to recover this quarter. Analysts will be looking for increased traffic, and listening for commentary for how the economic recovery is fairing in small town America.

Once again, stock market jitters worldwide have emerged in August when trading desks are thinly manned with junior staff. This year, the worries emanated from the self-inflicted economic woes in Turkey brought on by its leader, President Recip Tayyip Erdogan.

He thinks he knows more than markets and has taken full control of the Turkish economy. Even though its economy needs much higher interest rates and tough austerity measures, he will not hear of that and is leading his country down the path of Venezuela toward economic oblivion.

Turkey’s troubles then spread to much of the emerging world even though many countries hit by selling (by those junior staffers) have solid fundamentals. I cover all the details for you in an article that will appear on Monday at the Investors Alley website.

Why do I say the selloff in emerging markets was not justified? Because Turkey is ‘small potatoes’.

The country is not a significant player in the global economy. Last year its GDP was $900 billion, or about 1% of global GDP at market exchange rates. And when it comes to foreign exposure to Turkish assets, the impact is equally limited. Non-residents hold 20% of Turkey’s equity market, which has a market capitalization less than 2% the size of the U.K. stock market. In terms of debt, foreigners hold about 40% of Turkish government bonds – and Turkey’s public debt is quite low, at 30% of its GDP.

There’s been much talk about the exposure of certain European banks to Turkey. But even there, the exposure is quite limited. Of the Eurozone’s roughly €175bn claims on Turkish assets, Spanish banks have the largest exposure, with one of the country’s biggest, BBVA, having the most at risk. French and Italian banks are next, a very distant second. Korea barely slides into the top ten, and no other Asian country has any significant exposure to Turkey.

Market Effects

Emerging market stocks last Wednesday that their worst day in six months, sending the FTSE Emerging Index to a decline of more than 20% from its January 26 peak – a classic definition of a bear market.

The decline was exacerbated by a plunge in one of China’s tech giants, Tencent, as pressure from the Chinese government on video games and e-sports led to the company reporting its first quarterly drop in profits in over a decade.

The selloff also spread to developed markets on Wednesday, with Wall Street experiencing its steep decline since late June. And more importantly, a widely watched measure of the yield curve briefly dipped to a new decade low on Wednesday morning, as the fallout from Turkey’s escalating economic crisis ricocheted around the world.

The difference between two- and 10-year yields on U.S. Treasuries dropped to only 23.4 basis points. That was below its previous low of 23.6 basis points reached in mid-July. This spread is important because of its reliability as an economic indicator. It has turned negative, with the yield curve inverting, before every recession of the past 50 years.

Related: Buy These ETFs Setting Up for Profit’s from a Strong U.S. Dollar

Markets did stabilize and enjoy a robust rally on Thursday though after word that the U.S. and China are to resume formal trade talks in late August.

Time to Play Defense?

One interesting item I want to bring to your attention has been happening even before the Turkish turmoil. . .that is that investors around the world have turned more defensive. Some investors seem to be bracing themselves for some sort of economic slowdown or financial stress.

That can be seen in the recent outperformance of healthcare stocks. Globally, healthcare stocks have outperformed the technology sector to the greatest extent since mid-2016. Healthcare stocks have gained 8.5% in the three months through mid-August, according to data from Thomson Reuters. In comparison, the former leaders – global tech stocks –  rose only 4.1%. This is a classic sign of portfolio re-positioning to a more defensive posture.

This is good news if you’re invested in the sector. I’ve seen in my personal portfolio some European healthcare stock ADRs that have hit all-time highs recently.

Related: Dump These Healthcare Stocks Getting Amazoned

It looks like prolonged trade war talk is unfortunately slowing the global economy. “We are seeing a lot of leading indicators already starting to turn down; year-on-year trade growth is now decelerating quite rapidly and we are starting to see a rotation within markets,” said Ian Harnett, chief strategist at Absolute Strategy Research to the Financial Times.

And indeed, the rate of growth in world trade is slowing. The volume of world trade increased a mere 0.4% in the six months to May, according to the latest figures from CPB, the Netherlands Bureau for Economic Policy Analysis — down month on month from 2.8%. It was the slowest growth rate since the six months to October 2016.

Hints of slowing can be seen here in the U.S. too, if you know where to look. If the economy starts to grow more slowly, the impact will show up first in the price of refined fuels such as road diesel, marine gasoil and jet fuel that play a central role in the freight transport system.

These middle distillate fuels are principally burned in the high-powered engines used in trucks, ships, railroads, barges and aircraft to move freight around the world, as well as in factories, on farms and at mines and oilfields. Mid-distillates actually account for more than a third of the oil used around the world every day, and are the single-largest category of refined products.

In other words, distillate fuels are closely correlated with the global economic and trade cycle, and at the moment they confirm other indications the rate of growth is slowing. Even here in the U.S., distillate stocks, which had been drawing down faster than usual during the first four months of 2018, have now been building faster than normal since late May.

Even the mighty U.S. tech sector could become more and more vulnerable to the rising geopolitical and trade tensions. As Mr. Hartnett said to the Financial Times, “Trade wars could morph into tech wars, with a lot more talk about the tech sector and whether the U.S. administration will remain relaxed about how tech companies are fostering the globalization that it seems Trump is looking to reverse.”

Even if that doesn’t happen, I will be looking for more high-quality companies in the healthcare sector to add to the Growth Stock Advisor portfolio in the months ahead. In the meantime, stay tuned for more volatility – the historically volatile period of August, September and October is far from over.