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RMR Wealth Builders: 2019 Interest Rates, Stocks and Bonds Report

| June 24, 2019
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As of June 2019

Balance is necessary for a successful financial plan. Unfortunately, many investors aren’t sure where to begin. There are simply so many variables to consider. Stocks, bonds, and rates. Oh my! With trade talks going awry and tariff talks on the rise, the market is reacting with a great deal of uncertainty.

2019 Interest Rates

Workers in nearly every sector of the economy who have 401K plans, 403B plans, or IRAs have been pleased to watch, month after month, as their retirement savings have grown in a robust economy. Unfortunately, we know all too well, how quickly tides can turn.

Tariff talks have introduced more than a little uncertainty into the bond market. One of the first places that has become evident is with the shrinking of 10-year treasury yields to 2.139 percent – along with expectations they will shrink even further. These bond yields have plunged in response to talk of tariffs with Mexico.

Mixed Messages on Federal Interest Rates

Tariffs alone are not to blame for the uncertainty, though. Signals from the top indicate a loss of confidence along the line as well. Federal Reserve Chairman Jerome Powell has consistently raised interest rates, with the Fed raising rates seven times since January 2017 and suggesting further increases to come the second half of 2019.

However, in January 2019, he backed off on initial assertions of further rate increases to come adopting a “wait and see” approach instead. Now there is talk that the Fed will need to consider reducing interest rates in 2019 with some predictions that the first rate cut will occur in either July or September to address slowdowns in manufacturing stemming from trade war issues.

This is Good News for Investors

Prevailing wisdom says that the interest rate reductions will create an immediate bounce for stock investments. This is often just the right hit to encourage investing and get money flowing in the right direction throughout the stock market.

Of course, you want to continue to focus on a balanced investment portfolio as part of your successful financial planning. So is diversity. In fact, diversity is critical to your portfolio. When done well, it reduces portfolio volatility. This helps you weather financial storms because all your investment “eggs” aren’t in a single “basket.”

There are a few key details you must keep in mind, though, to ensure that you’re properly diversifying your portfolio.

  • Diversify assets (stocks and bonds, real estate, commodities, etc.) in your portfolio to spread your risks.
  • Never underestimate the importance of location diversity as well. Assets spread around the world help to minimize risks when one market suffers losses.
  • Diversify industry investments. This is the one most people think of when talking about diversity but should not be the only area where your portfolio adopts diversity.

The ultimate goal of portfolio diversification is to minimize your risks when one area, sector, class, or location is impacted by unforeseen occurrences without abandoning any one investment sector when things go awry.

After all, just because a setback occurs, doesn’t mean you can’t recover. In fact, if you have the time and patience to wait it out, you might discover greater rewards in the future.

Takeaways

  • Balance is necessary for successful financial plans.
  • Diversity is essential for a balanced portfolio.
  • Balanced portfolio spread out risks for financial losses.
  • World events affect portfolio values, confidence, and more, making location a larger matter than most people give credit.

It isn’t always easy to know the right moves to make when investing your own money. Sometimes it is essential to seek help with your personal wealth management and financial planning. Just make sure you get the right help. When that time comes, contact RMR Wealth to get your financial plan on track.

As of June 2019

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