There are winners and losers in everything—especially the financial markets. No matter the circumstances, some people are making money while others are losing it.
But there is one group of investors that’s been getting punished for awhile now, and with Federal Reserve Chair Janet Yellen’s comments last week, that suffering doesn’t appear to have an end in sight.
Are you in this group of investors?
Yellen said a lot of things last week, all of which basically added up to say that the Fed is very reluctant to raise interest rates.
In a previous statement, Yellen had said, “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.”
And despite her new wording of a similar comment that left the word “patient” out, Yellen also mentioned that the target rates of 0% to 0.25% remains the goal for now.
Small rate hikes could be coming late this year and beyond, but even those are likely to be in very small increments.
So while this is clearly good news for many, it’s also very bad news for a select group that’s been getting hurt for some time now.
Who is this group?
I’m talking about fixed-income investors. People who invest in bonds and CDs (certificates of deposit) are continuing to get hit hard.
Now, CDs continue to fall out of favor with investors, and the amounts held in CD accounts has dropped significantly over recent years due to low interest rates.
What now?
Fixed-income investors really have two choices…
1. Stick with bonds and CDs, suffer through the current spell of punishment, and slowly start to see returns as the Fed slowly raises rates, or…
2. Change philosophies to a more liquid approach in order to see returns now instead of months or years down the line.
When you know the pattern of the stock market, option #2 is better for everyone, especially those being punished by the current market and economic situations.
