At Value Monitoring Inc, our first rule of investing and, more broadly, for financial planning is, “above all, avoid significant losses.”
For over a decade, this investment principle seemed almost laughably easy to achieve as financial markets could seemingly do no wrong – it seemed that all time highs were reached again and again. A decade of near-zero interest rates accompanied by deep corporate tax cuts drove up not only stock and bond prices, but sent virtually all market classes soaring. You need only turn your attention to real estate prices, rising commodity prices – including record high prices at the pump, and the exploding demand for crypto currencies to name a few.
Looking back, the sudden and sharp Covid-induced sell-off of March 2020 lasted only briefly. Even the sub-prime mortgage crisis which sparked a general financial market meltdown of 2008 was short-lived.
But this time may be different.
The Federal Reserve’s policy of raising interest rates is arguably fueling the current downturn and the Fed has few other options than to keep pushing rates up.
Take a look at this recent opinion article (link below), that sums up many of the economic headwinds that have to bear. From the article:
…as Harvard economist Jeremy Stein commented a decade ago, “monetary policy gets into all the cracks.”
…(the) lowest-ever interest rates (have given) us the “Everything Bubble”.
At long last, the bill for the past 10+ years of an accommodating “easy” money policy may finally have come due. At Value Monitoring, we believe that risk averse investment strategies such as our high yield bond fund system are the place to be – especially for the foreseeable future. Our focus is to minimize significant losses.
If you would like to learn more, or just chat for 30-minutes with a professional about options for your current situation, please reach out. These are increasingly scary times, making it more crucial than ever to have clear and understandable guidance in place.