Get In The Game
By Michelle McKinnon, Financial Advisor
A few months ago, many people in the financial industry were dreading the possibility of an interest rate hike by the Federal Reserve (“Fed”). So what happened? Well, the Fed did raise rates, but by only a quarter of a percent.
A possible interest rate hike by the Federal Reserve had been cause for concern
When this increase happened, some interest rates actually went down
For months and months prior to the rate hike, everyone was speculating how the equity and bond markets would react. One would naturally believe that if the discount rate (the interest rate that the Fed controls) was about to be increased, that the bond market interest rates would follow. But in this case, the months following the rate hike, interest rates actually went down. Why? Well, the reality is that markets often have already priced in the news and there are many other factors that influence the bond market besides just the Fed’s Discount rate moves.
What’s the lesson here? Well my advice is stop trying to anticipate, and get in the game. By staying on the sidelines, you’re missing out on dividends and interest. Remember, cash is paying 0.01% whereas a diversified portfolio of stocks and bonds is paying anywhere between 3-4% annually (just in dividends and interest). Let’s stop guessing and get invested.
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