Your Survival Guy doesn’t want you to be in the interest rate prediction business because the talking heads just might end up being wrong.
Sure, the Fed funds rate may come down, but what if the buyers for the rest of the yield curve have a different opinion? Bond prices trade in anticipation of what’s to come six to twelve months from today, much like stocks do.
The fact that we need to even talk about the direction of interest rates and the associated guesswork is a shame. A gold standard that sets the value of a dollar with the same certainty that there are twelve inches in a foot and eight ounces in a cup would provide discipline—but that’s a politician’s worst nightmare. What a disaster it was leaving the gold standard.
Now, with the Fed being the buyer and seller of bonds through its oversized balance sheet, what does that signal to Wall Street? It says don’t worry, we’ve got your back, and keep on doing what you’re doing. Meanwhile, there’s no bailout for Main Street, the backbone of the country that needs to pay attention to risk.
Action Line: Just as Main Street finally has some interest rates it can sink its teeth into, the Fed begins going the other way. Wall Street cheers, Main Street jeers, and risk is politicized. When you want help with bonds in your portfolio, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.
Originally posted on Your Survival Guy.
