So, are you willing to bet your portfolio on whether we’re headed into bear or bull territory? We’ve had two of the largest bank failures in our country’s history in the last quarter, and we don’t yet know where the fallout will land or when it will end. The American consumer remains strong, but the banking system is rattled. Unemployment is at a multi-decade low of 3.4%. Despite peskily high inflation, the job market is remarkably strong. Why You Can Never, Ever, Time the Marketįor example, the Federal Reserve’s mandate is to bring core inflation down to 2% (we think 2% will be hard for the Fed to achieve, but it will almost certainly come down below 4.6%). But even if you wanted to try and time the market right now, the volatility in the economic data makes the case for a bull or bear scenario just as likely. I wouldn’t be too worried if you don’t possess this superpower - neither do we (and really, no one actually does over a long enough time horizon). We all know someone in our lives or in our social media news feeds who claims to be able to perfectly timing the market they buy at the valley and sell at the peak, perfectly. Stability is one of the main reasons many people consider buying bonds and making them a part of their portfolio. Bonds provide stability in uncertain market conditions, which is exactly where we find ourselves today. The next question you may be asking yourself is: “Why are you bringing up inflation when discussing bonds?” Because macroeconomic indicators can give you a better sense of where the market is moving, and our current market data is telling a very mixed story right now. So why do we favor bonds as a core component of our portfolios, despite CD rates being as high as they are right now? Because while CDs can be a great short-term cash equivalent, they don’t provide a long-term income stream like a stable bond portfolio can. SUBSCRIBE to HerMoney for free: Join us in the judgement-free zone today! In Praise of The Stable Bond Portfolio This had the intended effect - inflation has been trending lower for many months now. Because the Federal Reserve wanted desperately to fight inflation, the Fed raised their interest rates from 0% to 5% in only 14 months.
When your neighborhood bank is giving you risk-free Certificates of Deposit (CDs) at 5%+ rates, many people find themselves wondering: Is now still a good time to buy bonds?Īt current rates, a 6-month CD could give you up to 5%.
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