The rise and fall of our nation’s currency is nothing new. Buy low and sell high. Deficits and inflation. Penny pinching and payouts. Interest rates bear the same fruits. It’s no surprise financial investors feel squeezed amid 2018’s weathered predictions.
But, upticks don’t necessarily equate to upheaval. Here’s what every financial investor should consider – the blind spots and top billings – incentivizing your future.
Banking Institutions: Double Down & Cash In
When the Federal Reserve raises rates, short-term notes used by banks and financial institutions to invest cash also increase. This yields a higher return on cash holdings . Even giants, such as Citi Bank and Bank of America, are now trading as high as $18 more a share compared to one year ago . These upshots reflect a thriving economy where gratuitous fortunes, like consumer spending and tax cuts, trigger profits.
Blind Spot Worth Noting:
The Federal Reserve is expected to hike rates at least three times in 2018. And while banking and lending industries enjoy record level earnings, not all banks are created equal. Forbes, in conjunction with S&P Global Market Intelligence, has released its report, “America’s Best Banks 2018,” which aggregates data on growth, credit quality, and profitability .
Stock Options: Hedge, Hold or Fold
“Haste makes waste” according to some financial analysts. In other words, dumping stocks in response to rising interest rates isn’t necessarily practical – it’s reactive. There’s more to this fever pitch, including a modest, yet positive turnaround at just under 6 percent, on average, when you keep your holdings .
In fact, the average reported return for stocks across all periods between 1966 and 2013 is about 10% a year . Prudent trimming can be tolerated when you do your homework.
But, what about the larger fiscal bubble across continental waters? In the broader global market, there’s a groundswell of transnational demand according to Stephen Wood, chief market strategist at Russell Investments in New York. He predicts this extra demand will help keep U.S. rates from moving up to sky-high levels .
Blind Spot Worth Noting:
Historically, stocks are deemed riskier than bonds. If rising interest rates offer bond and short-term fixed income yields that are more attractive, coupled with less risk, then a trade-off between stocks and bonds is sensible .
Emerging Markets: A Worldly Pursuit
Will U.S. investors finally broaden bull market gains? Kathryn Koch, of Goldman Sachs Asset Management, encourages the move . Once a riskier endeavor, the global economy has now earned a sharp “multi-year winning streak.” Amid ballooning interest rates are disruptive advances overseas — electronic and autonomous-drive vehicles and factory automation, for starters. India, Indonesia, Brazil, and Argentina breed formidable opportunities as reported by Kiplinger.
Blind Spot Worth Noting:
Pockets of old and new economies (tech, industrial, and energy) are not without their challenges. Aging populations, unemployment rates, and lags in innovation, carry disproportionate pressures. Consult with a trusted financial professional to decipher global long-term gains.
The Bottom Line:
The bad news is rising interest rates aren’t devoid of risks. On the other side of the coin, however, is the opportunity to assess, adjust, and allocate proactively. Decide whether you want to reduce or eliminate rate risk, or profit from perceived market volatility. The alternative investment options are often worth the reward when mitigated by strategy and planning.
Visit our website and learn more about the benefits of alternative market investments and how you can work with us in 2018.
Investors should be aware of additional risks associated with alternative investments due to factors such as economic and political instability, regulatory requirements, increased volatility, illiquidity, higher management fees, lack of performance history, currency fluctuation, and differences in auditing and other financial standards and that these risks can be accentuated in alternative investments. Alternative investments may be suitable only to those who understand and are willing to assume the economic, legal and other risks involved.
The foregoing is not a complete list of the risks involved with alternative investments. You should thoroughly review all pertinent offering documents with respect to alternative investments with your financial, legal and tax advisors to determine whether the investment is suitable for you in light of your investment objectives and financial circumstances.
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 (Kulp, U.S. News & World Report 2018)
 (Moore, Forbes Personal Finance 2018)
 (Constable, U.S. News & World Report 2018)
 (Badenhausen, Forbes Business 2018)
 (Smith, Kiplinger’s Personal Finance 2018)