Stocks Have Recovered, Bonds Have Not
Beginning around June 15, both stocks and bonds began selling heavily due to the confusing commentary from the Fed on when they were planning to begin tapering their Quantitative Easing (QE) program. As you may remember, QE is the $85 billion/month bond purchase program intended to prop up our economy until unemployment falls. Any security that paid an attractive yield was going to take a hit in the sell-off. A few days later, the Fed came back out and reassured everyone that QE was not going anywhere for some time, and the selling ended.
This sell-off created a huge opportunity to profit for long-term investors. As a result, our Investment Committee used the cash balance that we built over the past few months to begin buying high quality stocks at bargain prices.
Bonds have yet to recover near their 2013 highs from April. Not to mention, the current volatility we are experiencing with bonds is not good because bonds are used for capital preservation and any sharp swings in prices is an indication of just how much risk exists in bonds. As of right now, our Investment committee feels more comfortable investing in equities simply because these are times when high quality stocks go on sale.
Read this week’s Thought of the Week to learn more about current market conditions and where our Investment committee sees it heading.
Click Here for the Weekly Thought As an Investment Advisory Representative working in conjunction with Global Financial Private Capital (GFPC) we are provided weekly thoughts on what is happening in the economy and the market. Written by our investment committee at GFPC we find these thoughts to be informative and interesting.