Today’s TGIF 2 Minutes features:
- A high-level update & follow-up on cryptocurrencies
- Brief comments on Inflation & 1st quarter 2022
Crypto Update
Continuing with the whirlwind of interest generated by “To Crypto Or Not To Crypto” and “Crypto Superbowl” there is more to say including highlighting the recent 36% decline in Bitcoin since November 2021. There is broad evidence that high-profile, fiduciary financial advisers are hesitant – for good reason – to include cryptocurrency across the board in client portfolios. At the same time, a good number of high-profile, responsible, fiduciary financial advisers are including cryptocurrency in some – emphasis, “some” – client portfolios, depending on the client’s goals and risk tolerance.**
There is still only one (1) Bitcoin ETF approved by the US Securities and Exchange Commission. Although there are Bitcoin indexes and separately managed accounts that have been developed by various providers. The information about investing in these vehicles is sophisticated and rapidly developing; all of which should give advisers and investors pause. The current volatility, required timing, and luck in cryptocurrency trading seem not at this time to be fairly compensating an investor for the risks involved.
Perhaps there is room for cryptocurrency exposure in long-term oriented portfolios? There is no telling where stock, bond and cryptocurrency markets are going in the coming months and 1-2 years. Stay tuned.
Comment on 1Q 2022 & Inflation.
The 1st quarter of 2022 just wrapped up and markets in general are skeptical – and down – for now. There are risks abound: political, geopolitical, economic, and fiscal (read: US government spending).
Inflation has risen 6.4% or 7.9% year-over-year depending on the calculation method, both the highest since 1982, and 40 years ago! Consumers have started purchasing less goods and the rise in mortgage rates could start to change home buying behavior.
Inflation, market performance, and interest rates are factors out of our control. Homebuying behavior is within our control. Experts have said that a change in homebuying behavior might not be all bad.
Other key factors remaining within our control are:
- Portfolio Asset Allocation – as in, amounts held in stocks, bonds & cash
- Specifically, amounts of cash savings, including emergency & splurge/fun money
- Discretionary spending
Note that consumer spending on services including travel is continuing to hold up especially in the wealthier demographics! Inflation may put a dent in this increase, but because lots of people have cash savings from NOT traveling for two years, demand for travel may continue strong although possibly more expensive.
REMEMBER, with both cryptocurrency and inflation, it may be difficult to stay calm and sane. Cash is king and can be comforting, and personal finance education is power.
*The diagram above first appeared in a May 2019 edition of TGIF 2 Minutes to illustrate how payment methods have evolved from Cash ($, far-left) to newer and often more convenient forms of payment such as credit cards (“CC” in diagram above), then PayPal and Venmo (the “P” and “V”) and now digital forms such as Bitcoin (the “B”, far-right in diagram). The world has rapidly gone digital in hundreds of ways including social and money.
**BUYING CRYPTOCURRENCIES IS EXTREMELY VOLATILE AND RISKY.
CRYPTO EXCHANGES, CRYPTOCURRENCIES AND THE BITCOIN ETF ARE **NOT** FDIC INSURED IN ANY WAY.