This week brought long-awaited although not unexpected news from the US Federal Reserve Board: Fed officials expect to raise interest rates from the current level of “near zero” by the end of 2023 instead of sometime in 2024. Earth-shattering? NO. Cause for paying attention? YES. Even though 2023 seems fairly distant, interest rates have already begun to increase. It is not too early to pay attention to, review, and understand your overall Asset Allocation. Thus, today’s title, “CYA”. Cover Your Asset Allocation.
As quick background, the US Federal Reserve System, or the “Fed”, has as its mandate to maximize US employment and allow for stable prices. Its primary tool for accomplishing these goals is the setting of short-term interest rates – which then translate into to interest rates for anything from 30-day Treasury bills to 10-year Treasury notes, to 15- and 30-year mortgages. Even debt issued globally watches the Fed’s interest rate policy.
Have you ever had back trouble? Boy can it be a pain in the ### (pun intended). Recovery is usually possible by seeking – and taking – proper advice and treatment. Believe it or not, there is a way to relate the recovery process from back pain to the recovery and durability of investment portfolios. Stay with me here!
I will credit my excellent physical therapist, who knows very well my profession as a CFP®, for coming up with the concept. He said to me, “like your advice about my 401k allocation, the physical strength work a person does for years can make recovery from back trouble much swifter and even easier.” Hooray! While the recovery process for a person’s back can take several weeks to several months, the recovery process for properly positioned investment portfolios has been actively taking place for over 12 months and could continue over the life of a portfolio.