The Weekly Update 2/07/2025
Interest Rates are the Problem!
Let’s take a look under the hood at that statement! Bond prices increase or decrease in reaction to interest rate movements. In the chart below, Truevestments has graphed bond prices since late 2022 to present.
As you look at the chart for the 10-year U.S. Treasury bond, notice that in the purple box interest rates have moved within a touch less than ¾%!
So, we have all this angst over whether the Federal Reserve will crash our economy by not reducing interest rates. The question you might ask is, did the economy crash over the last two years while interest rates were at this level?
Not even close! In fact, just the opposite! Check out this chart from the Bureau of Economic Analysis for our U.S. Gross Domestic Product (GDP) which measures all of the goods and services we create and sell as a country.
Two recent economic “disasters” are noted with the purple dots. First, the Great Recession of 2008-2009 and second the Covid worldwide shutdown. With the arrows, you will note our economy actually took off like a rocket after each disaster. Our economy is the strongest ever on planet earth. Notice in the top left purple box, our economy is just a quarter or two away from starting with a “3” as in $30 trillion.
As you have read here before, a growing economy has historically pulled the valuation of Corporate America up with it. Make up any bad news you choose, but the reality is that our economy is growing and so is Corporate America. Time, like five years, tends to smooth out any air pockets of volatility we might incur on our clients’ trip up toward their bigger financial future mountain.
I am interested in your thoughts, comments, and observations. Feel welcome to call, email, or stop by the office and say Hi.
Respectfully,
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.