The Interest in Interest - 1st Quarter 2023

Dear Valued Client, 

For the last 15 years or so, yield in interest-bearing financial instruments has been about as difficult to obtain as a tan in Seattle during the month of February. The ratcheting-down of the fed funds rate that started in 2005 and subsequently leveled out close to ZERO in 2008 has finally roared back with a vengeance beginning last year in order to combat the runaway inflation we have before us that was instigated throughout the COVID epidemic. What I will NOT do here and now for the sake of time is extrapolate on the reason why we stayed in such a low-rate climate for so long nor how inflation came back to bite us in a Post-Covid world like a rabid junkyard dog. I also will not go into whether the Fed is addressing this inflation problem with the best strategy for the present moment in raising interest rates as steadily and high as it has at its last eight meetings. No, folks...these are wonderful, thoughtful, intricate conversations that I’d love to have with all of you at your convenience and at your discretion. What I want to discuss today and furthermore to raise awareness is that there is an incredible opportunity at our doorstep that has not been available for the last 15 years.

I spend a lot of time talking with clients about building diversified investment portfolios for the long-term, holding fast to those investments in the face of short-term economic/stock market chaos and most importantly having confidence that those investment portfolios will produce favorable returns that justify the patience and diligence it often takes to stay invested over the long-term. Indeed, I stand by that belief and I encourage almost everyone to invest a good portion of their money in such a manner.

But as we’re speaking today, there is a lot of money that’s been kept on the sidelines in more conservative, interest-bearing instruments such as savings accounts, CDs and even older annuity accounts for fear of not wanting to invest too much in the capital markets or simply just needing a more conservative place to set aside funds. The latter example is where the opportunity lies today. The last time I saw such an opportunity in fixed interest-related investments as an advisor was 2007.

There is, however, a kicker to all of this...at some point (and nobody knows exactly when), the Fed is going to stop raising rates and quite possibly start reducing them as soon as inflation gets under control. Interest rates rise and fall and generally don’t stay in the same place for too long as history has shown. The eight years where they stayed near zero was a HUGE exception and starved the average conservative investor of yield in such a way that there was almost no choice except to invest in stocks in order to potentially exceed a 5% rate of return on their money. When this inevitably happens, the fixed rate opportunities we’re seeing right now will likely have evaporated to some degree as well. Quite simply, if you’ve got conservative money that hasn’t been making a lot of interest in a dog’s age (that’s roughly 15 years), this could very well be your lucky day (year). Let’s talk.

CRN-5514044-031523