Fixed Income Q1 2021

While part of this rise can be attributed to the improving economy, the rise is also due to the expectation for accelerating inflation.

While higher yields translate to higher income for investors, it is important to look at yields not only on an absolute basis but on a “real” basis (i.e. the yield after subtracting the inflation rate). While higher yields on longer maturity bonds might be tempting at face value, we have generally limited our bond purchases to maturities in the three to seven year maturity range. Because bond prices fall as interest rates rise, longer maturity bonds have more price sensitivity. By “staying short” on the yield curve with regard to bond purchases, we can mitigate some of the price volatility in bond portfolios. If rates were to rise further in the future, we also have greater flexibility to take advantage of higher yields as shorter maturity bonds mature. Even as longer-term rates move higher, we do not expect short-term rates to rise very much in the near term. The Fed is not forecasting
an increase in the short-term federal funds rate until 2022 and perhaps as late as 2023. While they may need to reconsider if growth and inflation exceed expectations, they will also likely seek to prepare investors for this possibility well in advance of raising rates. Until then, we are focused on buying relatively short maturity and high quality government, corporate, municipal bonds and bond funds that offer a modest yield and principal protection.

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Economic & Market Commentary

Fixed Income Q2 2024

As expected, the Federal Open Market Committee (FOMC) voted to leave short -term policy rates unchanged at 5.50% at its June meeting. The Fed acknowledged “modest further progress” on inflation but is not quite ready to cut rates. We expect the Fed to keep interest rates at current levels for most of this year. For investors, that means cash yields will remain elevated. But there is also a risk to holding too much cash
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Economic & Market Commentary

Equities Q2 2024

Strong stock market performance continued through the second quarter, but at a more moderate pace and with fewer positive contributors when compared to the first quarter. Three months ago, we highlighted strong economic growth, falling inflation, and hopes of near-term Fed rate cuts as the three key positive dynamics sending stocks higher in 2024. Today, that list has narrowed to two. Economic growth remains strong and inflation is still moving in the right direction.
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