With interest rates rising for savings and CDs, I’ve had a few questions on whether or not CDs should take the place of bonds in a portfolio. After all, you can earn nearly the same interest rate on a 1-year CD (4.15%) as a 2-year Treasury (4.18%) as of January 19th…

As inflation soared in 2021, so did the rate you could earn risk-free on government I-bonds. I originally wrote about the benefits of these in January of last year. Later in the year, the starting interest rate peaked at nearly 10%. There was so much consumer interest in buying them, that the treasury website crashed the day before interest rates reset lower.

With inflation starting to come down, I have gotten a few questions about whether these bonds are still attractive…

Last year around this time I published an article, Potential Pitfalls In Bond Investing. What followed was the worst year for bonds in decades. I’d like to think I timed the article perfectly, but it was more a coincidence than anything. I watched over the years as the bond market composition changed dramatically, particularly the average maturity of bonds increasing by over 50% from 4 years to 6+ years in the past decade.

This resulted in a painful year for passive bond owners this year as long-term bonds got hammered. I wanted to reshare the post because the principles still apply as you consider how to invest in bonds going forward…

A client recently asked, “Who is buying in this market?” It’s a great, simple question. If you turn on the news, it sure sounds like everyone is selling. But that is not the case. SPY, one of the most widely held ETFs has an average trading daily volume of 86 million shares - which equates to approximately $32 Billion trading hands every day.

For each seller represented here, there is a buyer. Even on a really bad day in the stock market, the fact alone that the market doesn’t fall to $0 means that there has to be buyers.  So, who are the buyers?

What drives stock market returns? Economic activity, politics, wars, viruses, inflation, interest rates...the list could go on. Over the long run, the answer is simply two things - (1) company earnings and (2) how much investors are willing to pay for those earnings.  

With everything that has gone on this year, some bright news is that corporate earnings have remained fairly stable, with 5.1% growth through the end of September.  What’s changed is how much investors are willing to pay for those earnings…