What does this mean for you?
After much debate from economists, traders, and investors, with theories on how a rate hike or a decision to stay the present course could affect U.S. markets ranging dramatically, as of this writing (9-18-2015) it appears that anyone who guessed that either move would spur a significant change in the financial environment may have missed the mark. The Fed announced yesterday that they would not be increasing rates, and Wall Street consequently saw movement roughly equivalent to the proverbial drop in a bucket.
At least for another thirty days, the federal stimulus policy remains in place, and market conditions seem at the outset to be poised for similar constancy. Though the Fed’s policy has helped a steady bull run in the U.S. stock market, each passing month brings about fresh uncertainty about how a rate increase might impact our economy. It is worth noting that, while some individual investors obsess over federal interest rates when making decisions about how to invest, these rates are not necessarily tied to market movement in either direction.
Generally speaking, higher federal interest rates are associated with decreased positive public sentiment towards the stock market and other investment avenues. Leading up to yesterday’s announcement, many feared that a modest rate hike could have a consequential ripple effect, as lower consumer spending tied to higher debt payments tends to drag down key markets.
It is important to keep in mind, however, that broader conditions do not always affect every investment equally – and that one cannot say with any degree of certainty that an interest rate increase by the Fed will push down stock prices in the first place. The intense complexity of our economy and our capital markets can often lead to asset performance which defies trends, and it takes more than a simple eye on federal interest rates to determine when, where, and how, to invest.
The real teachable moment here for those of us who see investments as an important part of their long-term financial plan is that short-term market conditions and fluctuations are not reliable indicators of long-term performance. They may not even have an appreciable impact on your financial health in the short term. When making a financial plan for your whole life, there are many factors to consider, and many options for how to approach the process of achieving your goals. By taking a broader view of both your current fiscal position and the market as a whole, a fiduciary professional can help you focus on what matters most to you and your family.
BFA Wealth Management’s collaborative, interactive approach to making long-term financial plans is designed to help you see the big picture, to help you navigate away from levels of risk you are not comfortable with, and to let you focus on living your life well instead of worrying about short-term market conditions. We help our clients move away from situations such as concentrated stock positions, and we believe that the personal relationships we form with our clients are our most important asset. If you want an investment strategy and comprehensive financial plan designed objectively, with only your best interests in mind, we’re here for you. Let’s talk.