Should You Finally Consider Adding Bonds to Your Portfolio?
Drastic times call for drastic measures
We are in “unprecedented” times; a “polycrisis.”
A pandemic, war in Ukraine, inflation, supply chain issues, an impending recession, high government debt, rising energy prices, climate issues, and political divide.
It may seem like we are facing many issues, but these have been ongoing for months. There’s almost nothing new to discuss.
One new topic to discuss is the rising short-term interest rates and falling financial markets.
Interest Rates
The Federal Reserve has been raising the benchmark interest rate for the last few months. Since raising rates in March, the Fed has raised rates at each of the following meetings. And they will raise rates at their September meeting (September 20–21); it is widely accepted the rate increase will be 0.75%.
Interest rates are now at an elevated level. After years of being held near zero, they are finally above the Fed’s inflation target of ~2%. The only issue, inflation is now at 8%.
So the 2% interest you receive on your savings is still losing purchasing power in comparison to the current inflation rate.
