The Weekly Wealth of Knowledge is your download of this week's most important topics related to financial planning, the markets, and our community. January is here and it is New Year, New You month at MONECO Advisors. All month we will be providing you with a host of content about new goals, new habits and new financial planning ideas.
In this issue:
- Fast Start For 2021 (3 min read)
- Bond Yields Moving (2 min read)
- Building Inner Strength (3 min read)
This week, Client Relationship Manager, Chris Levene, is featured in our introduction video!
Fast Start For 2021
The first few week of 2021 have already had many ups and downs. Just because it’s a new year doesn’t mean that the 2020 challenges go away, and so far, 2021 has been no exception to this rule.
The markets opened on January 4 and traded lower out of the gate, with the S&P 500 dropping 1.5%. The last time the market opened lower was in 2016, when the S&P 500, the Dow Jones, and the Nasdaq Composite all dropped on the first trading day of the new year.1,2
The stock market’s first hurdle of the New Year was to assess the runoff elections happening for the two Senate seats in Georgia. A special election has only happened three other times in our nation’s history, so the market appeared anxious about the process.3,4
The bond market also got into the act early in the new year. The yield on the 10-year Treasury bond closed over 1% for the first time since March 2020 as investors anticipated a pick up in inflation.5
The market’s second hurdle was the electoral college count that would confirm Joe Biden as the 46th president of the United State. A protest during the vote count unnerved investors, and most of the New Year’s rally was undone. But a day later, the market climbed higher as traders looked past the unrest.6
What does this fast-paced market activity mean for you, as an investor?
There will always be a lot of noise, but having a financial plan in place is key to pursuing your goals. But remember, making a change to your portfolio should be driven by sound analysis, not an emotional response to current events. The events of the past few weeks are part of the volatility that comes along with investing, and something we’ve anticipated as we developed your overall financial plan.
If you are concerned about one or more of the policies being discussed in our nation’s capital, please give us a call. We’d welcome the chance to hear your perspective, and hopefully, we can provide some insight, guidance and recommendations.
Bond Yields Moving
The 10-year Treasury yield has climbed higher since the New Year, which means that some bond prices are dropping. You may have seen the headlines that say, “10-Year Yields Over 1%.”
For some, the first time they experience a change in bond prices is when they open their monthly statement and review their investments.
But before you check your January statement, here is some background that may help put the most recent move in rates in perspective.
The interest rate on the 10-year Treasury dropped steadily in the first half of 2020 and bottomed at 0.54% in late July. While rates remain at historic low levels, the yield on the 10-Year Treasury has doubled in the past six months. That’s a significant increase in a relatively short period of time. The recent rally that pushed the yield over 1% has drawn the most attention.1
Why are rates going higher? Even with the Federal Reserve holding short term rates near zero, yields on longer-term bonds can move higher as the economy begins to improve and inflation expectations rise.2
Will bond yields keep going higher? A lot may depend on the path of the virus, vaccine distribution, and what’s next with additional stimulus money.3
Bonds can play an important part in any portfolio, but like any investment, periods of volatility are expected. If you’re concerned about the outlook for bonds, or the macro-economic trends behind the bond market’s rally, please give us a call. We’d welcome the chance to hear your perspective, and hopefully, we can provide some guidance.
Building Inner Strength
As you know, January is New Year, New You month at MONECO Advisors. All month long we have been focusing this section on different ways you can get outside, remain active and take more time for yourself. This article is not about new diets or new exercise regimes, but rather steps you can incorporate into your daily lives, to build your inner strengths, to assist with all that you may encounter in 2021. Setting boundaries around your precious time will be key for a healthy and prosperous year and here is your guide!
1. Barrons.com, January 6, 2021
2. USAToday.com, December 31, 2020
3. WashingtonPost.com, January 5, 2021
4. CNN.com, January 6, 2021
5. The Wall Street Journal, January 6, 2021
6. Yahoo.com, January 6, 2021
Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
Indexes discussed are unmanaged and you cannot directly invest into an index. Past performance is not a guarantee of future results.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.