US interest rates rose sharply in November resulting in new bonds being issued with higher yields and existing bond prices falling. RWM’s fixed income strategy seeks to minimize portfolio losses specifically when interest rates rise.
The Vanguard Group has written clearly and concisely about the role of bonds in a portfolio and shared their perspective about rising interest rates. Click to read Yield surge: Remember bonds’ real role. We share the thinking outlined in this artile.
What do we do now?
We are not recommending a change in the fixed income strategy. Once certain thresholds have been triggered, we will actively look to take profit from allocations that have risen in value and buy into those that have declined. If the recent trends continue, that would mean selling from US stocks and buying new, higher yielding bonds.
|Index Performance||Nov.||YTD||Trl 1 Yr|
|US Stock (Russell 3000)||4.48%||10.58%||8.31%|
|Foreign Stock (FTSE AW ex US)||-2.32%||2.32%||0.57%|
|Total US Bond Mkt. (BarCap Aggregate)||-2.37%||2.50%||2.17%|
|Short US Gov. Bonds (BarCap Gov 1-5 Yr)||-0.95%||1.00%||0.86%|
|Municipal Bonds (BarCap 1-10yr Muni)||-2.75%||-0.82%||-0.48%|
|Cash (ML 3Month T-Bill)||0.02%||0.28%||0.32%|
Raffa Wealth Management is an independent investment advisor providing nonprofit organizations, high net-worth investors, and qualified retirement plans with a full range of investment consulting services. We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets. Visit us at www.raffawealth.com
All investing is subject to risk, including the possible loss of the money you invest. Past performance is no guarantee of future returns. Diversification does not ensure a profit or protect against a loss.