So, despite the fact that he keeps saying he'll raise interest rates inadequately, maybe the Federal Reserve will keep hiking the rate until it's where it needs to be. Maybe he's pulling a Trump and just telling markets what they want to hear with an actual plan to raise interest rates more appropriately What happens then?
Well, I've anticipated this too and with today's volatility, I guess I should say something about it.
If interest rates are going up and inflation will be curbed my favorite liquid asset, cash, will likely remain king until interest rates reach a level that is greater than inflation. In this case bond ladders will get you there.
Gold, the not-an-investment investment, won't spike in the dollar as inflation is less of a risk - it will spike in other currencies like the pound however. Some money will doubtlessly still end up there as the broader market falls.
The broader market will fall as the price of borrowed money increases and some are forced to deleverage. Future bonds will have higher interest rates and those might become quite valuable. A strong dollar also means foreign investments will seem to lose relative value. As inflation is curbed however the real value of investments will maintain more real value, a correction will happen faster, but that means less time holding onto unproductive cash.
While there are plenty of bears out there, like me, predicting a major correction to many the markets and economy are doing fine. They are, and have been for some time, that is in fact what worries me. With strong bottom lines and continued mergers and acquisitions, the melt-up should continue if only for a short time.
The current Federal Funds rate is 1.75%, if interest rates are increased 4 to 5 more times this year it should reach 2.4 to 3% by years end which should be around the level of inflation. Bond ladders will be high on my list. 32 and 52-week issues will help kick the can further down the road until the market has declared itself.
So what do we know? The broader stock market should take a hit in the next 18 months, inflation is going to be a persistent risk, interest rates will be at least 2.5% by the end of the year.
I'm still targeting August for my rebalances.
Well, I've anticipated this too and with today's volatility, I guess I should say something about it.
If interest rates are going up and inflation will be curbed my favorite liquid asset, cash, will likely remain king until interest rates reach a level that is greater than inflation. In this case bond ladders will get you there.
Gold, the not-an-investment investment, won't spike in the dollar as inflation is less of a risk - it will spike in other currencies like the pound however. Some money will doubtlessly still end up there as the broader market falls.
The broader market will fall as the price of borrowed money increases and some are forced to deleverage. Future bonds will have higher interest rates and those might become quite valuable. A strong dollar also means foreign investments will seem to lose relative value. As inflation is curbed however the real value of investments will maintain more real value, a correction will happen faster, but that means less time holding onto unproductive cash.
While there are plenty of bears out there, like me, predicting a major correction to many the markets and economy are doing fine. They are, and have been for some time, that is in fact what worries me. With strong bottom lines and continued mergers and acquisitions, the melt-up should continue if only for a short time.
The current Federal Funds rate is 1.75%, if interest rates are increased 4 to 5 more times this year it should reach 2.4 to 3% by years end which should be around the level of inflation. Bond ladders will be high on my list. 32 and 52-week issues will help kick the can further down the road until the market has declared itself.
So what do we know? The broader stock market should take a hit in the next 18 months, inflation is going to be a persistent risk, interest rates will be at least 2.5% by the end of the year.
I'm still targeting August for my rebalances.