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Friday is the day of Summer Solstice.  This is the longest day of the year in the northern hemisphere.  For us this means an early dawn, long day, and a late sunset.  Meanwhile, south of the equator, winter begins.  Ancient cultures knew the sun’s path across the sky, the length of daylight, and the location of the sunrise and sunset all shifted in a regular way throughout the year. 

Interest rates have been on a path of increases since 2015, yet the economic cycle is giving us clues to possible changes on the horizon. 

Remember last year when the talking heads and experts on your favorite news channel were saying we’d have 5% CDs again soon, and why buy bonds now when rates are going higher?  Well, the Federal Reserve met this month and left rates unchanged…and signaled for lower rates to come!  There goes the interest we were just starting to earn on our checking and savings accounts.  We started buying bonds and CDs last year in portfolios, keeping perspective that asset allocation is key to investment portfolios, and no one can “time” the market precisely on when to buy and sell.  

Our institutional bond expert was able to provide us with specific notes and current implied probabilities through 2019 and 2020.

  • No change in rates at current meeting
  • Uncertainties have increased globally
  • 8 officials see lower rates in 2019, 8 on hold, 1 for a rate hike
  • 9 of the 17 officials see lower rates continuing into 2020
  • Core inflation running below 2%
  • Household spending has picked up
  • Business investment is soft
  • Labor market continues to be strong

The Fed meets 8 times a year and raised rates 4 times in 2018.  So far this year, there have been no rate increases, and signaling rates going lower.  What does this mean to your money and your financial plan?  Last year stocks went up, and bonds went down.  So far this year, stocks have gone up and bonds have also gone up!  Can we really have our cake and eat it too?  Regardless, our team keeps clients diversified – holding stocks, bonds, and cash – prepared for the natural cycles of our economy. Enjoy this Summer Solstice knowing that you have a plan that can survive the changing interest rates.

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