On this week’s episode of Tape Talk, Quint and Daniel explore the moves higher this week across a variety of markets. Stocks, bonds, and gold, nearly every asset had its time in the spotlight this week.
Much of the week’s moves were based on investors interpreting the headlines as good news. Focus turned from the recent protests in Hong Kong to the good economic indications come from data in the US, employment reports were decent, and the Fed is still indicating a move to a more accommodative policy at its September meeting. Combine these headlines with the US and China looking towards their next trade talks in October and investors found little to be negative about this week.
Watch Your Bond Funds
While many assets are up recently, it’s important to remember what that means. Investors would do well to keep in mind that bond prices and bond yields move inversely of one another. This means that with yields near historic lows, investors are seeing the value of their bond funds near all-time highs. While “set it and forget it” is a method employed by some, those that keep a vigilant eye on their portfolios may consider how much farther bond funds can rally if rates are already under 2% across the board.
Understand Your Plan
Your required rate of return is an important thing to know. This is the return you need to achieve to meet your goals. However, it’s also important to know how that rate works into your plan. If you’re looking in the rearview mirror here you’ve benefited from multiple assets classes rallying over recent years. Now may be the time to discuss with your advisor what a pullback in some of these assets may do to your expected rate of return compared to your required rate of return. Unless you are confident that all these assets can continue marching higher indefinitely it’s worth considering how the future may look different from the past and incorporating that into your plan.