Good news for seniors with no debt and savings.
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Can you imagine the gnashing of teeth that certain individuals would have if we had a rate hike in June, a few months before the primary?!?
How is schadenfreude spelled again?
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Feels like the whole rate hike narrative flipped pretty fast. Just a few weeks ago everyone was talking about cuts, now suddenly hikes are back on the table and even being taken seriously. If that actually happens, it’s going to hit sentiment hard, especially equities. Cash and low-debt positions might finally start looking smart again.
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The yield curve is rising as it is.
Good luck with the good news for seniors. Holding US paper is a death trap.
Rock and a hard place. I am 70 years old and went overweight cash (nearly 30% cash) when the tariff frenzy hit in March of last year. I also moved as much money from U.S. equities to international equities as I could without incurring a huge tax bill (about 25% of my equities moved from U.S. to international equities). For the next 11 months, the international equities outperformed the U.S. equities, and both outperformed cash.
Now we may be looking at the kind of financial Armageddon that I was I was hedging against last March. My move to cash will only be a good move if we have a crash like 2008-9. And in 2008-9 we had a functioning Fed. Now we have a crumbling Democracy in the hands of an insecure and irrational dictator.
Signed,
NervousNellyPops.
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This means you missed out on the 15% increase over the last 12 months. Hopefully it resulted in better sleep.
DB2
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Odds of a Fed rate hike by June are now higher than the chances for a rate cut
While strictly speaking, this headline is true, it is still misleading. I went to look at the fedwatch tool to see the actual numbers, and the current June numbers say -
16.5% chance of hike by 0.25%
0.6% chance of a hike by 0.50%
83% chance of no change at all
0% chance of a cut
So, yes, odds of a hike are indeed higher than odds of a cut, BUT the odds are overwhelmingly that there will be no change at all in June.
It’s much more instructive to look further out in this case. If you look at December, there is about a 53% chance of no change, and a 47% of a hike, and a 0% chance of a cut. That means that the traders (remember, there is REAL money behind the calculation of these probabilities, it’s not just random opinion) believe there is a much higher chance of continued inflation, and a lower chance of an associated recession (at least a severe enough one that would cause rates to drop).
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Bob,
You’ve got a round trip ticket.
Yes. The 30% I put in cash earned about 4% while my international equities peaked at about 35% gains prior to the attack on Iran, and my U.S. Equities peaked at about 30%. The gap between equities and cash has been dropping since the war started and the cash is still earning whatever the interest is. Nobody knows where these crashes will end, and I do follow the sleep at night rule, but I also play the long game and still don’t enjoy arguing with people who appear to me to cherry pick stats to win internet arguments.
Do you have any thoughts to share about your own allocations and reasoning for them?
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I haven’t changed my allocations for about five years now. I’m not a bond fan, so basically zero there. Being retired, a large cash/money market percentage (20-25%) as a cushion. Several preferred stock positions for the interest. International exposure is low (<5%) as long-term growth potential of the US is high, even though international stocks are now playing catch-up after 2-3 decades of underperformance. Absolutely no interest in European stocks given the regulatory and slow-growth policies there.
Interest, social security, annuities and IRA distributions give my wife and I more money than we need. At least 10% goes to charity, particularly to the special needs community.
DB2
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I admit gasoline pricing haven’t gone up as much as I expected. Perhaps the Iran war will have less impact than what I have been reading in the Main Stream Media?
In any case what business sectors will be negatively impacted by an interest rate increase?
I’m guessing financial, real estate, and consumer discretionary sectors will be most affected.
Like iampops5 I sitting on a fair amount of cash. Though I am never out of the stock market. As I am concerned about US stock valuations. I have moved 10%ish into international markets & lighten up on the tech sector quite a bit early this year.
I am 75 years old and sleeping quite well as my wealth continues to grow. Yes I very well might be missing out on greater returns. My concern now is protecting what I have accumulated.
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I’m only in cash. I do not have money markets. They are 80% plus US paper.
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It’s amazing how things determined by actual money sometimes change rapidly. I happened to still have that fedwatch tab opened and it updated, and I noticed that the numbers changed dramatically in just a day or two!
The current December numbers are:
No change - 74.2%
Hike by 0.25% - 22.5%
Hike by 0.5% - 2%
Hike by 0.75% - 0.1%
0.25% cut - 1.3%
So now about 75% no change, 25% hike.
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Uhhmm, “Fasten your seat belts we’re in for a bumpy ride”?
The costs being imposed just by the nervewrackedness of our economic environment are starting to feedback into the scale of whatever the hell is about to happen.
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