Did you know that consumer prices climbed 6.8 percent in November from the past year – the quickest pace of increase since 1982? Inflation is real and the Federal Reserve is about to take action. The federal funds rate (currently set at zero) is expected to be increased three times in 2022. Let’s talk about what that may mean for your portfolio.
When you’re expecting rates to rise, the first thing you want to look at is your investment selection. Rising interest rates make it more expensive for both consumers and companies to borrow money. For this, and other reasons, rising interest rates can hurt stock prices overall. However, there are certain industries that tend to perform better when rates rise. For example, you might want to consider the financial sector, healthcare, and consumer staples.
Next, interest rate hikes are a good reason to examine your personal debt. Refinancing your mortgage or other long-term debt at a lower fixed rate before a rate hike may help you keep the interest on your debt from outpacing the returns on your investments as rates rise.
Finally, consider bonds. They not only provide a relatively predictable stream of income, but they also can act as a portfolio stabilizer, helping to smooth out returns during times of market volatility. A balanced fixed-income portfolio with short, intermediate, and long-term bond maturities – known as bond laddering – can help position your fixed-income portfolio as interest rates change.
Remember, a good financial plan is designed with your long-term goals in mind. It likely already takes the possibility of rising interest rates into account. But if rising interest rates are on your mind, let’s talk. You can schedule a phone call with one of our advisors by calling (602) 343-9301 or clicking here.
This content is provided for informational purposes only. It is not a guarantee of future success, is subject to change, and is not intended to serve as the basis for an individual’s financial decisions. Investing involves risk, including the loss of principal. Strategy Financial Group does not provide specific legal or tax advice. Please consult with a qualified professional for guidance on your individual situation. Investment advice if offered through Strategy Financial Services, LLC, a Registered Investment Adviser. Insurance and annuity products are offered separately through Strategy Financial Insurance, LLC.