Blom & Howell Financial Planning
  • Home
  • About Us
    • About Us
    • Our Team
  • Services
    • Financial Planning
    • Retirement Planning
    • Investment Management
    • Social Security Planning
    • Insurance Planning
    • College Planning
  • Insights
  • Contact Us
  • Account Access
    • Schwab Alliance
    • MoneyGuide Pro
  • Home
  • About Us
    • About Us
    • Our Team
  • Services
    • Financial Planning
    • Retirement Planning
    • Investment Management
    • Social Security Planning
    • Insurance Planning
    • College Planning
  • Insights
  • Contact Us
  • Account Access
    • Schwab Alliance
    • MoneyGuide Pro

INSIGHTS

CATEGORIES

All
College
Economy
Estate Planning
Financial Planning
Healthcare
Investing
Retirement
Social Security
Tax Strategy

When the Fed Talks Inflation, Bond Investors Listen

9/24/2020

 
Picture
What the Fed’s new policy may mean for you.
 
Most recently, you may have read that Federal Reserve Chair Jerome Powell announced a change in how the Fed views inflation. In the past, the Fed said it would consider adjusting short-term rates when inflation approached 2 percent. But in light of 2020’s many challenges, the Fed’s new policy may allow inflation to run above 2 percent for a period of time before any shift in monetary policy is considered.1
 
For many, bonds are a critical component of their overall investment strategy. So any change in Fed policy regarding inflation may influence a portfolio. That's why it’s so important to understand that the market value of a bond will fluctuate with changes in interest rates. In other words, when interest rates rise, the value of existing bonds will typically fall.2
 
There’s no doubt this will be a subtle change for many. But for bond investors, the policy shift may indicate that the Fed has given itself more flexibility in the future.
 
But, what does that mean for the outlook for the bond market as a whole? It’s unclear. However, lower levels of unemployment in recent years have not led to higher inflation. This new phenomenon runs counter to the Phillips curve, a concept which states that inflation and unemployment have a stable and inverse relationship. With this data in mind and the changes announced by Chairman Powell, it could be argued that the Fed believes the relationship between unemployment and inflation has changed.3
 
Keep in mind that if an investor sells a bond before maturity, it may be worth more or less than the initial purchase price. By holding a bond to maturity, an investor will receive the interest payments due plus your original principal, barring default by the issuer. Investments seeking to achieve higher yields also involve a higher degree of risk.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
 
Citations.
1. Schwab.com, August 27, 2020
2. Asset allocation is an approach to help manage investment risk. Asset allocation does not guarantee against investment loss.
3. Investopedia.com, May 19, 2019

Comments are closed.

    Categories

    All
    College
    Economy
    Estate Planning
    Financial Planning
    Healthcare
    Investing
    Retirement
    Social Security
    Tax Strategy

    Archives

    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    June 2018
    April 2018
    January 2018
    December 2017
    October 2017
    August 2017
    July 2017
    May 2017
    April 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    July 2016
    June 2016
    March 2016
    December 2015
    September 2015
    August 2015
    May 2015
    November 2014
    October 2014
    August 2014
    June 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    June 2013

    RSS Feed

Company

About Us
Services
Blog

Contact Us

Connect With Us

SEARCH

Find Us On Facebook
Connect on LinkedIn

Stay Connected. Stay Educated.
Sign up to receive our newsletter, market updates, and information on upcoming Blom & Howell events delivered straight to your inbox.
Sign up for our Newsletter
Blom & Howell Financial Planning, Inc. | 3340 Tully Road, Suite B-4, Modesto, CA 95350 | Phone: 209.857.5207 | Fax: 209.857.5098

Investment advisory services provided by Blom & Howell Financial Planning, Inc. Advisory services are offered to clients or prospective clients where Blom & Howell Financial Planning, Inc. and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. 
Privacy Policy |  Form ADV Part 2A  |  Form ADV Part 2A Appendix 1​  |  ADV Part 2B - Gary Blom | ADV Part 2B - Michael Howell