Locking in Rates
People often ask me about their investments and where I believe the market is going this year. After 25 years in the business, I’ve learned that answering that type of question is simply a mistake. I have no idea where the Dow will be on December 31st, and neither do any other professionals in the money management business. What I do know is what the markets are telling us today and how to use the market’s forward indicators to allocate properly for our clients. But contrary to common stock dialog, the best macro indicators come from the BOND market and the current rate environment is telling.
90-day treasuries are still paying a juicy 5.3%, which is attractive if you’re not concerned about duration. But investors looking to lock in interest payments for longer periods are having difficulties finding products now. Five-year treasuries are paying just 4.1% and AAA corporates offer little more at 4.32%. The inversion of the bond market is real as investors chasing yield have poured a record $150 billion into bond ETFs this year. That flow has pulled rates lower and with Fed rate cuts on the horizon, they may go even lower. I believe the lower rate cycle is here to stay and I'm scouring the bond market for long-duration debt with decent interest for clients needing conservative allocation. The bond market’s message is clear and a year from now interest rates may be too low to justify allocation.
As always, I appreciate your continued trust and confidence.
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