07/27/2023
Good afternoon. The Fed raised rates again yesterday, something I expected and think makes sense. Here are some thoughts:
1) We’re probably getting to the end of the rate-hike cycle. It’s intended to reduce inflation, and it seems to be working.
2) But it will take a while (~2025) for inflation to fall to the Fed’s 2% target.
*Inflation hit ~10% in the wake of the pandemic—way higher than what’s healthy for the US economy.
*Hikes should end before target is reached. There’s usually a lag-effect from rate-changes.
3) I remain in favor of money market funds instead of bonds, for now and for most clients.
Example: if one should have a Moderate-risk portfolio of 60% stocks and 40% bonds, I may be using the Schwab Value Advantage Money Market Fund (SWVXX) for most or all of the bond-sleeve of that portfolio.
*Bond prices decline when interest rates increase.
*I shift between bonds and money mkt funds accordingly for my clients if/when suitable (each client is different—so this is not a blanket solution for all).
4) SWVXX is also a great cash-alternative. If you have a lot of cash in the bank or your Schwab accounts, let’s consider putting it into the money market fund instead.
Please contact me for a portfolio review. We’ll make sure to update your investments as necessary, and we can review your overall financial situation also.
I hope you’re enjoying a nice Summer. Stay in touch. Thank you!
--Gary
Garo Linck Partoyan
Financial Advisor
Potomac Wealth Strategies, LLC (PWS) is an independent Registered Investment Advisor (RIA) firm based in Virginia and serving clients across the USA. PWS provides investment and financial advice to individuals, families, small businesses, and non-profit organizations.
