{"id":961,"date":"2022-04-25T19:51:10","date_gmt":"2022-04-25T19:51:10","guid":{"rendered":"http:\/\/gpswp.com\/bradyassetmanagement-2\/?p=961"},"modified":"2024-02-02T23:07:07","modified_gmt":"2024-02-02T23:07:07","slug":"sale-on-interest-ratesbuyer-beware","status":"publish","type":"post","link":"https:\/\/gpswp.com\/bradyassetmanagement-2\/2022\/04\/25\/sale-on-interest-ratesbuyer-beware\/","title":{"rendered":"Sale on Interest Rates\u2026Buyer Beware"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large is-resized\"><img loading=\"lazy\" src=\"http:\/\/gpswp.com\/bradyassetmanagement-2\/wp-content\/uploads\/sites\/833\/1650900990_economicactivity.png\" alt=\"\" class=\"wp-image-962\" width=\"357\" height=\"299\" srcset=\"https:\/\/gpswp.com\/bradyassetmanagement-2\/wp-content\/uploads\/sites\/833\/1650900990_economicactivity.png 940w, https:\/\/gpswp.com\/bradyassetmanagement-2\/wp-content\/uploads\/sites\/833\/1650900990_economicactivity-300x251.png 300w, https:\/\/gpswp.com\/bradyassetmanagement-2\/wp-content\/uploads\/sites\/833\/1650900990_economicactivity-768x644.png 768w\" sizes=\"(max-width: 357px) 100vw, 357px\" \/><\/figure>\n\n\n\nOn Sunday, March 16, the Federal Reserve Bank (the Fed) took aggressive measures to lower the effects\nof the Coronavirus-19 on the United States and Global Economies. They lowered the Fed Funds rate\nfrom 1% to 0%. This follows the rate cut made 2 weeks prior on March 3 from 1.50% to 1%. The last time\nthe Fed took such aggressive actions to cut interest rates was back in 2008, during the Great Financial\nCrisis.<br><br>\nSince 2008, the United States and other global economies have maintained historically low interest rates\nto offset the effects of deflation and to increase economic activity. Some countries, like Japan, Eurozone,\nSwitzerland and others, have flirted with negative short- and long-term interest rates.<br><br>\nFed funds rate is the anchor for banks and financial institutions to determine longer term interest rates,\nto create what is known as the yield curve. A lower fed funds rate will allow banks to lower interest\nrates on mortgages, home equity loans, credit cards, business loans, and other lending activities.\nAlternatively, the 0% interest rate environment is hurting people with cash, savings, and investments. To\nput in perspective where we are today, in the 1980s the fed funds rate reached 19.1% and 6-month CD\nrates hit 17.75% (Federal Reserve).<br><br>\nThe average US Treasury 10-year bond rate during the 1980s was 10.59%. Currently, the 10-year US\nTreasury bond is yielding 1.05%. If you had retired in the 1980s vs. in 2020, your investment income\nwould be around $95,400 higher each year.<br><br>\nThe low interest environment is creating challenges for many who are retiring or who are already\nretired. To maintain sufficient income throughout retirement, many are faced with the challenge of\nstaying invested in the stock market or investing in low yielding bond funds in the uncertain economic\nenvironment. In an attempt to reduce the investment risk of stocks, many investors are turning to bond\nfunds with lower credit quality (high yield bond funds) and\/or longer maturity for higher yields, without\nthe understanding the true risks.<br><br>\nInvestors purchasing high yield bonds take on significantly higher credit risk vs. interest rate risk. In the\nlower trending interest rate environment we are experiencing currently due to the Coronavirus-19, at\nthe time of writing, the iShares iBoxx USD High Yield Corporate Bond ETF (YTD down 12.42%) has\nunderperformed the iShares 3-7 Year Treasury Bond ETF (YTD up 4.45%) by nearly 16.87% since the\nbeginning of the year.<br><br>\nIf the events of 2008 are any guide, we can expect the Fed to aggressively utilize all the tools at its\ndisposal to stabilize the financial markets and avoid a prolonged recession. It is likely that interest rates\nwill stay low longer than most expect, as the Fed waits for the economy to find footing and exhibit a\nsustainable path of growth. Similar to 2008, today\u2019s uncertainty will likely present opportunities and\nchallenges for borrowers, lenders, and investors going forward.<br><br>\nSteve Kim is a Managing Director at Brady Associates Asset Management and has an office in Greenfield,\nMA.<br><br>\nFor more information, see the following:\u0000\n<br><br>\nhttps:\/\/www.depositaccounts.com\/blog\/historical-cd-rates.html\nhttps:\/\/www.forbes.com\/sites\/forbesfinancecouncil\/2019\/09\/03\/retirement-trends-of-babyboomers\/#5b3f56457378\nhttps:\/\/www.thebalance.com\/the-basics-of-investing-in-high-yield-bonds-417068\nhttps:\/\/www.barrons.com\/articles\/bbb-rated-bonds-high-yield-debt-dividends-51570049607\n<br><br>\nSecurities and investment advisory services are offered through Gradient Securities, LLC (Arden Hills, MN\n866-991-1539). Member FINRA\/SIPC. Gradient Securities, LLC (a SEC Registered Investment Advisor)\noffers investment advisory services under the d.b.a. of Gradient Wealth Management. Gradient\nSecurities, LLC and its advisers do not render tax, legal, or accounting advice. Insurance products and\nservices are offered through Brady Associates Asset Management.\n","protected":false},"excerpt":{"rendered":"<p>On Sunday, March 16, the Federal Reserve Bank (the Fed) took aggressive measures to lower the effects of the Coronavirus-19 on the United States and Global Economies. They lowered the Fed Funds rate from 1% to 0%. This follows the rate cut made 2 weeks prior on March 3 from [&#8230;]<br \/><a class=\"read-more small\" href=\"https:\/\/gpswp.com\/bradyassetmanagement-2\/2022\/04\/25\/sale-on-interest-ratesbuyer-beware\/\">Continue Reading <i class=\"fa fa-long-arrow-right\"><\/i><\/a><\/p>\n","protected":false},"author":1,"featured_media":962,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.7.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Sale on Interest Rates\u2026Buyer Beware - Brady Associates Asset Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sale on Interest Rates\u2026Buyer Beware - Brady Associates Asset Management\" \/>\n<meta property=\"og:description\" content=\"On Sunday, March 16, the Federal Reserve Bank (the Fed) took aggressive measures to lower the effects of the Coronavirus-19 on the United States and Global Economies. 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They lowered the Fed Funds rate from 1% to 0%. 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