Is The Fed Really Raising Interest Rates?
Back in January of this year the news flow was rife with pundits predicting the death of the Bond Market with forecasts of blistering interest rate rises ahead. In all fairness these pundits may end up being right in the long run. However, year to date they have either been early or wrong. Some may call it “Fake News” but the facts are: since the turn of the year, long term interest rates measured by 30 year Treasuries have declined from 3.05% to 2.76% (source:markettrends.net). Creating an environment where rate sensitive investments like TLT and many other government bond funds have a better risk adjusted return for the year than the SP500. Once again, the stock market gets all the attention while other asset classes get some coin.
With this move lower in rates it doesn’t appear the bond market is all that concerned about the rhetoric around The Fed raising rates or the assumed pro-growth Trump agenda. This could all change tomorrow but for the near term it appears rates may move a bit lower from here. We bring this to your attention because in January our phone was ringing with a lot of questions about interest rates, bonds and what investors should do – buy, sell or hold. At that time we shared these charts with as many as we could and encouraged them to wait before selling if they were worried about higher rates and how that would affect their net worth.
At this point, the easy call was back in January. Now we rest in what is called “no man’s land”, somewhere between the bottom and top of an intermediate term cycle where predictions are probably no better than a coin toss. That being said, if you were losing sleep back in January about rising rates and didn’t act, then this may be a decent place for you to start reducing some of your exposure to the interest rate sensitive investments in your portfolio. If you’re not sure which investments those may be or if you are wondering if this even pertains to you then you may want to consider seeing us at one of our future events or giving us a call to ask for a stress test on your portfolio. Until next time, remember the news isn’t always fake but it is often up for interpretation.
The opinions expressed are those of Colby McFadden and Quiver Financial as of August 23, 2017 and are subject to change due to market or other conditions. This is not a solicitation or recommendation of any investment; always consult a Financial Advisor before investing into any investment. Securities offered through WestPark Capital, Inc. - Member FINRA / SIPC / http://brokercheck.finra.org Advisory Services Offered through WestPark Capital, Inc. 18872 MacArthur, 1st Floor, Irvine, CA 92612 - 949.590.4200