Bond Thoughts - III

| March 20, 2018
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Tomorrow the Federal Reserve will most likely raise interest rates by 0.25% as it continues to tighten monetary conditions.

This will be the sixth rate increase since the Fed lowered rates to zero during the Global Financial Crisis.

With that said, many clients wisely ask about the risk of higher interest rates and the effect on bonds held in their portfolios.

While each cycle is different I want to highlight actual data regarding what historically happened to high quality bonds when the Fed raises short-term interest rates.

This data ranges back to 1983 and covers the previous seven rate increase cycles.

During these seven distinct periods, the Bloomberg Barclays US Aggregate Index averaged a cumulative return of +3.92%.

Yes in two instances, bonds did lose money (1987 and 1994) and they may well again in this cycle.

However, the point is that it is not a certainty and it does not make sense to sell all of your bonds because of the potential for more Fed rate increases.

 

Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O

 

Disclosure
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Meyer Capital Group), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Meyer Capital Group. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Meyer Capital Group is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Meyer Capital Group’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

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