The articles below offer general information, opinions, and forecasts and should not be considered advice.
Market Minute
July 2024 – By Bob Veres
Inflation impacts all of us in a number of ways, not just in a steady rise in the prices of the things we buy every day. One of the most complicated is how the monthly/annual inflation rate influences our interest rates—the rate at which we borrow money.
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August 2023 – By Kyle Rohrwasser
A little history before we jump in, many people use this saying in their everyday lives, but many don’t know the origin. It was the actual origin of the idiom that comes from Homer’s Odyssey. In Homer’s Odyssey, Odysseus must pass between Charybdis, a treacherous whirlpool, and Scylla, a horrid man-eating, cliff-dwelling monster.
Although not a monster, the Fed has found itself in a situation that has one long-term solution but the timing of it will be tricky. As stated in many previous articles, the Federal Reserve has raised rates dramatically over the last year and a half, moving from 0% to 5.25%. This was done in the face of record-breaking inflation over the last 40 years, hoping the economy would slow and drive prices down. We have seen inflation fall from a 9% high in June of last year to a 3% month-end July of 2023, still short of the Fed’s 2% goal. Everything leads to lower rates eventually, but the question is, can the Fed time it correctly?
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March 2023 – By Kyle Rohrwasser
An eternity ago in 2021, the Federal Reserve kept reiterating that inflation was “transitory”. We, like many others, were skeptical because of the amount of money printed and moved into the financial system. This collided with a wildly efficient shipping industry that had stopped dead in its tracks (pun unintended) while demand for products continued to grow. But how do we get those products at such low and reasonable prices? Well, many of you may be familiar with China and US trading but you don’t understand how truly efficient the ships and logistics have gotten in the past 30 years.
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October 2022 – By Kyle Rohrwasser
Just in time for Halloween, the 60-40 portfolio model has risen from the grave in just a few short months. A 60/40 portfolio has long been an industry standard, representing 60% equities with a ballast of 40% fixed income. Between October of 2018 and August 2020, we saw 10-year treasury rates drastically move down from 3.23% to 0.55%. That created a paradigm shift towards equity over fixed income. Fixed income prices move in the opposite direction of their yields. As yields drop, prices increase, and vice versa. This inverse relationship is known as Interest Rate Risk and is measured by a data point known as duration. During the summer of 2020, with fixed income yields pressed lower, adding interest rate risk almost guaranteed losses in the event the Federal Reserve increased interest rates. This had some analysts claiming the 60/40 portfolio was dead, as the ‘safe’ portion of the portfolio (fixed income) carried a high degree of interest rate risk while simultaneously paying very little yield. This dynamic caused many investors to allocate even more to equities to compensate for the poor fundamentals within the fixed income market.
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