Viewpoint / September - 6 Meridian

2 downloads 334 Views 599KB Size Report
Aug 15, 2017 - Barclays Global High Yield. Barclays Emerging ... somewhat higher yields for savers and investors, the av
Viewpoint / September Chart of the Month

1-yr LIBOR

Over the past 18 months the Federal Reserve has raised short term interest rates from 0.25% to 1.25%. While this increase has resulted in somewhat higher yields for savers and investors, the average savings account still only yields 0.06% (according to FDIC as of August 28, 2017). If investors are willing to consider other safe (but not guaranteed) short-term alternatives, they can find some reasonable yield. This chart shows the one year LIBOR interest rate for the past 2.5 years. LIBOR is a benchmark interest rate that is used for consumer and corporate loans. Our experience is that a diversified portfolio of short term debt with reasonably high credit quality should earn 0.5% - 1.0% above LIBOR, or 2.2% - 2.7% based on the current LIBOR level of 1.7%. If you have excess funds that you want to invest conservatively, don’t settle for the poor yields in savings or money market accounts. Discuss with your advisor about alternatives available based on your goals and risk profile.

2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 12/31/14

8/15/17

Source: FactSet 2017.

The Advisor Survey: Margaret Dechant, CFP®, Chief Executive Officer, Wealth Advisor

Given the length of the current bull market and what appear to be relatively high valuations, should I consider reducing the risk and/or raising cash in my portfolio? Both history and common sense tell us that markets do indeed cycle and that volatility will return at some point. Harvesting portfolio gains and raising funds to cover shorter term cash flow needs is a prudent strategy and one often used in rebalancing client portfolios. This allows investors peace of mind in knowing cash is available when needed, regardless of market trends, but also keeps the longer term portfolio allocation intact. Until recently, a related question has been, what to do with the cash given extremely low short term interest rates. With the gradual shift in short term rates, there are investments that offer attractive yields with relatively low risk. There is an opportunity for clients to set cash aside, take some risk out of the portfolio, all the while earning ‘cash on their cash’.

August

YTD

2016

Benchmark

United States

0.3%

11.9%

12.0%

S&P 500

Intl Developed

0.0%

17.5%

1.5%

MSCI EAFE

Emerging Markets

2.3%

28.6%

11.6%

MSCI Emerging Markets

US Investment Grade

0.9%

3.6%

2.6%

Barclays US Aggregate

Intl Investment Grade

1.1%

10.1%

1.5%

Barclays Global Aggregate xUSD

Global High Yield

0.6%

8.7%

14.3%

Barclays Global High Yield

Emerging Markets $

1.4%

7.4%

9.9%

Barclays Emerging Markets USD Aggregate

Commodities

0.4%

-2.7%

11.8%

Bloomberg Commodity Gold New York Spot ($/oz)

Source: FactSet 2017

Stocks

Bonds

Other

Gold

4.1%

14.8%

8.5%

Oil

-6.1%

-12.3%

44.8%

Crude Oil WTI/Global Spot NYMEX

E / [email protected] • P / 316.776.4601 / 855.334.2110 • F / 316.776.4620 W W W . 6 M E R I D I A N . C O M • 1635 N. Waterfront Parkway, Ste. 250, Wichita, KS 67206 Securities offered through Private Client Services LLC, Member FINRA/SIPC. Advisory products and services offered through 6 Meridian LLC, a Registered Investment Advisor. Private Client Services LLC and 6 Meridian LLC are unaffiliated entities. 6 Meridian LLC is a Registered Investment Adviser. This newsletter is solely for informational purposes. Advisory services are only offered to clients or prospective clients where 6 Meridian LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by 6 Meridian LLC unless a client service agreement is in place. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary, therefore, the information should be relied upon only when coordinated with individual professional advice.