Issues
The Fed has raised the Fed Funds rate six times this year to combat inflation and the last four times at a 0.75% clip. The current 4% rate is the highest in well over a decade. But inflation hasn’t budged even after the rate hikes, a shrinking GDP, and a bear market.
At the November meeting, the Fed Chairmen stated that the previous 4.5% to 5.0% Fed Funds goal no longer applies. It will have to go higher. The U.S. economy is resilient, but it will eventually give way to the forces aligned against it. It is almost certain that there will be a recession in 2023.
Meanwhile, for the first time since forever, you can get investment-grade, fixed-rate investments that pay 5% or even 6%, for now. But recessions put downward pressure on longer interest rates as loan demand dries up.
In this issue, I highlight a rare opportunity to lock in a high fixed rate while it lasts and add balance and diversification to the portfolio. Let’s not miss it.
At the November meeting, the Fed Chairmen stated that the previous 4.5% to 5.0% Fed Funds goal no longer applies. It will have to go higher. The U.S. economy is resilient, but it will eventually give way to the forces aligned against it. It is almost certain that there will be a recession in 2023.
Meanwhile, for the first time since forever, you can get investment-grade, fixed-rate investments that pay 5% or even 6%, for now. But recessions put downward pressure on longer interest rates as loan demand dries up.
In this issue, I highlight a rare opportunity to lock in a high fixed rate while it lasts and add balance and diversification to the portfolio. Let’s not miss it.
Updates
The recent market rally has leveled off and is wavering. The next few days may determine whether the market rally continues, or the indexes retreat once again.
The latest upturn has been stoked by optimism over retreating inflation and a softer, gentler Fed. The Central Bank is widely expected to raise the Fed Funds rate at a slower 0.50% pace, versus the last four hikes of 0.75%, at the December meeting in two weeks. But Chairman Powell is giving a speech today. Any indication of a higher-than-expected hike will undo the major reason for the recent rally.
The latest upturn has been stoked by optimism over retreating inflation and a softer, gentler Fed. The Central Bank is widely expected to raise the Fed Funds rate at a slower 0.50% pace, versus the last four hikes of 0.75%, at the December meeting in two weeks. But Chairman Powell is giving a speech today. Any indication of a higher-than-expected hike will undo the major reason for the recent rally.