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I agree with everyone here. I think the fed will hold rates steady through 2024.
I am trying to decide if this is a good time to buy some 3-5 year treasury bonds for my sister, who is 77 years old.
What would your sister do with the money otherwise? Would she invest it in stocks? Shorter term Treasury bonds seem like a solid choice. I do think that stocks will outperform bonds over that stretch, but given her age and time horizon bonds may be a safer bet. This is only my own opinion for what its worth.
What would your sister do with the money otherwise? Would she invest it in stocks? Shorter term Treasury bonds seem like a solid choice. I do think that stocks will outperform bonds over that stretch, but given her age and time horizon bonds may be a safer bet. This is only my own opinion for what its worth.
I do her investing, and she is 55% in equities, all index funds, and 45% in a money market. I have not bought bonds due to the low interest rate environment. She has a huge pension, and doesn’t need this money to live off. But I plan to borrow this money to purchase a house sometime in the next year. (The housing market is too competitive right now) and then pay her back once my current house sells. If I had to sell her bonds at a loss, I would make up for the difference.
Fidelity said I can sell either all or part of the bonds anytime, but of course the principal isn’t guaranteed. She doesn’t need this money to grow, but I hate to lose out when interest rates start to drop. I was looking at buying a 3 year and 5 year treasury bond, and possibly a AAA corporate bond. The amount she has to invest is $300,000. This money is in a taxable brokerage account, and she is in the 24% tax bracket, but I have to watch out for IRMAA too.
Last edited by organic_donna; 11-16-2023 at 07:35 AM..
Fidelity said I can sell either all or part of the bonds anytime, but of course the principal isn’t guaranteed. She doesn’t need this money to grow, but I hate to lose out when interest rates start to drop. I was looking at buying a 3 year and 5 year treasury bond, and possibly a AAA corporate bond. The amount she has to invest is $300,000. This money is in a taxable brokerage account, and she is in the 24% tax bracket, but I have to watch out for IRMAA too.
Corporate bonds have much bigger bid-ask spreads than Treasuries. I wouldn't buy a corporate bond unless I intended to hold to maturity. There are lots of bond ETFs to choose from if you want to own corporates, and I think that's a better option for most.
Treasuries are easy to buy and sell in my experience.
With respect to your question about where rates are headed over the next year or so, I'll confess I have no guess I'd want to act upon. I invest with a longer timeframe than that.
Corporate bonds have much bigger bid-ask spreads than Treasuries. I wouldn't buy a corporate bond unless I intended to hold to maturity. There are lots of bond ETFs to choose from if you want to own corporates, and I think that's a better option for most.
Treasuries are easy to buy and sell in my experience.
With respect to your question about where rates are headed over the next year or so, I'll confess I have no guess I'd want to act upon. I invest with a longer timeframe than that.
My sister’s age is a factor on how long I want to go out, I prefer 5-7 year treasuries for her.
I do her investing, and she is 55% in equities, all index funds, and 45% in a money market. I have not bought bonds due to the low interest rate environment. She has a huge pension, and doesn’t need this money to live off. But I plan to borrow this money to purchase a house sometime in the next year. (The housing market is too competitive right now) and then pay her back once my current house sells. If I had to sell her bonds at a loss, I would make up for the difference.
Fidelity said I can sell either all or part of the bonds anytime, but of course the principal isn’t guaranteed. She doesn’t need this money to grow, but I hate to lose out when interest rates start to drop. I was looking at buying a 3 year and 5 year treasury bond, and possibly a AAA corporate bond. The amount she has to invest is $300,000. This money is in a taxable brokerage account, and she is in the 24% tax bracket, but I have to watch out for IRMAA too.
Why would you lock up money in Treasury bonds that you plan on borrowing next year? That sounds like a poor decision. Instead, why not consider CD's? They pay similar interest rates and can be liquidated easily. You can also do shorter durations. The principle is guaranteed. You will not lose any money due to market fluctuations.
What do you think will happen with interest rates going forward? Today's lower-than-expected CPI numbers have resulted in the market forecasting Fed interest rate cuts in 2024. Do you agree?
With a probability of 99%, the market is forecasting "no change' in interest rates at both the December and January Fed meetings.
The market is forecasting a 25% chance of a Fed rate cut in March 2024, a 65% in May 2024, and a whopping 87% in June 2024.
Personally, I disagree with the market. I think the Fed will keep interest rates "higher for longer" than the market's current forecast. I think when the Fed meets at the end of January 2024, they will have data showing the consumer's spending in December will have been far more robust than currently anticipated. As a result, I think there will be another rate increase at the end of January, with no cuts at all during 2024.
But then again, my history at forecasting such things is pretty abysmal.
****
The consumer price index was flat in October from the previous month but increased 3.2% from a year ago. Both were below Wall Street estimates, sparking a major rally on Wall Street.
Excluding volatile food and energy prices, the core CPI rose 0.2% and 4%, against the forecast of 0.3% and 4.1%. The annual rate was the smallest increase since September 2021.
The flat reading on the headline CPI came as energy prices declined 2.5% for the month, offsetting a 0.3% increase in the food index.
I watch all Danielle Di Martino Booth's updates and what you are saying is pretty much in line with what she is saying. Expecting another rate hike, higher for longer and when they do start cutting rates it will only be 25 basis points at a time and they will never go below 2% again. The Fed's goal is to crush inflation and break the Fed Put in the markets.
What do you think will happen with interest rates going forward? Today's lower-than-expected CPI numbers have resulted in the market forecasting Fed interest rate cuts in 2024. Do you agree?
With a probability of 99%, the market is forecasting "no change' in interest rates at both the December and January Fed meetings.
The market is forecasting a 25% chance of a Fed rate cut in March 2024, a 65% in May 2024, and a whopping 87% in June 2024.
Personally, I disagree with the market. I think the Fed will keep interest rates "higher for longer" than the market's current forecast. I think when the Fed meets at the end of January 2024, they will have data showing the consumer's spending in December will have been far more robust than currently anticipated. As a result, I think there will be another rate increase at the end of January, with no cuts at all during 2024.
But then again, my history at forecasting such things is pretty abysmal.
****
The consumer price index was flat in October from the previous month but increased 3.2% from a year ago. Both were below Wall Street estimates, sparking a major rally on Wall Street.
Excluding volatile food and energy prices, the core CPI rose 0.2% and 4%, against the forecast of 0.3% and 4.1%. The annual rate was the smallest increase since September 2021.
The flat reading on the headline CPI came as energy prices declined 2.5% for the month, offsetting a 0.3% increase in the food index.
Well, the retail sales data for Christmas is in. As I had expected, sales data was quite strong -- stronger than expected by most economists.
NEW YORK (AP) — Americans stepped up their spending at retailers in December, closing out the holiday shopping season and the year on an upbeat tone and signaling that people remain confident enough to keep spending freely.
Retail sales accelerated 0.6% in December from November’s 0.3% increase, the Commerce Department reported Wednesday. Because spending by consumers accounts for nearly 70% of the U.S. economy, the report suggested that shoppers will be able to keep fueling economic growth this year.
Among last month’s overall retail purchases, sales at stores that sell general merchandise rose 1.3%. Sellers of clothing and accessories reported a 1.5% increase, as did online sellers. By contrast, furniture and home furnishings businesses declined 1%, reflecting a struggling housing market. Sales at restaurants were unchanged in December.
Few are talking about a rate hike. I'd like to see a hike, but then again, I don't get a vote. Austan Goolsbee, the President of the Federal Reserve Bank of Chicago, is a complete dove and unfortunately quite influential. He's also more of a left-wing politician and wants the economy to be strong going into the election,.
Last edited by moguldreamer; 01-17-2024 at 09:21 AM..
It's going to be higher for longer +QT until something breaks.
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