Investors, particularly those reviewing the fixed income part of their portfolios, are lamenting the current reality of relatively low interest rates. Yes, portfolio management would be easier and more fruitful if the interest rate on the 10 year treasury was 4% instead of 2%. But it isn’t, so work with your advisor(s) to construct an investment strategy that reflects current reality.
Will interest rates ever go back up? Yes, but the “when” is difficult. While there continues to be a great deal of media focus on possible rate increase action by the Fed, it is likely that the markets will be the determiners of interest rates.
Globally, there is a lot of money looking for a safe haven. Many very large investors, including individuals, corporations, and governments continue to believe that dollar denominated securities, issued or guaranteed by the U.S. government, are the most liquid and secure option. They are making it easy for the U.S. treasury to continue to finance the nation’s growing debt at exceptionally attractive rates.
You may want a better return on your savings, but as long as the world’s very large players are willing to accept the current low rates, you’re stuck.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®