SharpePoint Private Client Group

Where to go when rates move down:

In short – High-quality longer-term bonds.
There is an inverse relationship between interest rates and bond prices. We saw in 2022 that many small banks were decimated as they held long bonds through the rate hike cycle. This one perplexed me, and if it wasn't intentional, Casey Jones was surely sleeping at the wheel... The interest rate cycle, along with rate and currency arbitrage are fundamental proficiencies banks are assumed to have.

So, when rates are expected to move in the downward direction, long-term bonds, and other interest rate-sensitive securities are a great place to turn, and history (and the math) is our best indicator. Investors get an above-normal yield as they wait for the prices to move upwards (in some cases, skyrocket). And, by the way, low-interest rates mean better loan terms for the consumer, improved home and auto sales, as well as a general increase in consumer spending.

Small Capitalization Stocks (Small Caps):
Cheaper debt means better EPS (earnings per share) and better bottom line for those small companies that rely heavily on debt to finance their operations. To give you an idea of what those types of companies are, check out the holdings in S&P SmallCap 600 Index, or the Russell 2000 Index.

Looking at history, data shows that small caps tend to outperform large-cap stocks during declining Fed Funds rates. This has happened in nine rate-cut periods since the 1970s. It’s important to note that each period has its own economic and financial conditions, so there may be other factors at play…

Emerging Markets Income:
Reader's Digest version - higher risk generally means higher yield. If high yield is the goal, EM debt can be an area to grab that larger payout and use it for other purposes. And, if the thought is the US dollar may wane in value compared to its counterparts, the foreign currency may help hold the value.

Second of Three in this short series.

Where Not to be in 2024:
Cash and high-yield corporates, and other securities that have a high positive correlation will be affected. Cash/money markets are paying 5.25% on the high end, but are very interest rate sensitive. When rates are coming down, money markets and cash will start to pay less immediately. Corporate high-yield bonds are generally shorter-term investments. Investment-grade corporate bonds have had their spreads compressed and do not have not as much upside as longer-term treasuries.

At some point this year, when we get a hint of rate-lowering, we plan to discard the negatively affected inverse correlated securities and look to the positively affected ones.

A Few Items to Consider in 2024.
This is the first of 3 posts on this subject. We thought it made sense to break it up into bite-sized pieces.

Inflation:
Inflation seems to be super-sticky this time around. Putting on our Monday morning quarterback helmet on, it appears the Federal Reserve made the first mistake by not raising rates soon enough. That forced their hand into making much larger rate hikes starting March of 2022 than they would have liked, and more than we are used to seeing. We are not sure exactly when this year the rates will begin to fall, but looking at the data, it may be in the latter half of the year. With the indications that large corporations are giving us about planned layoffs, that would seem to fit the narrative.

Happy Leap Day!

Some Important Economic Indicators were released this morning.

U.S. Unemployment claims: 201,000 - down 5.63%
U.S. Personal Consumption: 19.00 Trillion - up 0.71%
U.S. Personal Income: up 23.36 Trillion 0.26%
Current 30 year Mortgage rate: 6.90%

New 2024 Tax Rates for Long Term Capital Gains (For those investments held for longer than one year).

From all of us at SharpePoint, we wish everyone a fun and safe 4th of July!

Happy Father’s Day!

“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.” – John F. Kennedy

From our SharpePoint family to yours, We hope your day is filled with family, friends, and fun.

Happy Star War Day!

From our SharpePoint family to yours we wish everyone a Happy Easter!

Happy President’s Day

"Intelligence plus character — that is the goal of true education." ... - Martin Luther King Jr.

Happy Friday!

From our SharpePoint family to yours, Happy new year!

Happy holidays!

Happy Tuesday!

One of SharpePoint's own, Brian Robinson, CFP®, Financial Advisor and Partner, was featured in Forbes discussing tax-loss harvesting.
https://sharpepoint.com/wp-content/uploads/2022/12/Forbes_B-Robinson_Tax-Loss-Harvesting.pdf

If you have any questions, call us. Our SharpePoint team of professionals can help guide you to success.

Please contact us via our website or office phone.
Website: www.sharpepoint.com
Office Phone: (480)999-3033

From our SharpePoint family to yours we wish everyone a Happy Thanksgiving!

Happy Wednesday!!

Happy Tuesday!

One of SharpePoint's own, Brian Robinson, CFP®, Financial Advisor and Partner, was quoted again in USA Today.
https://sharpepoint.com/wp-content/uploads/2022/11/Robinson-B-Article-11_19_2022.pdf

If you have any questions, call us. Our SharpePoint team of professionals can help guide you to success.

Please contact us via our website or office phone.
Website: www.sharpepoint.com
Office Phone: (480)999-3033

Happy Veterans Day!

We honor those who have served to protect our country, our lives, and our freedom. You have our gratitude forever and always.

From all of us from SharpePoint, We wish everyone a fun and safe Halloween.

Happy Friday !

One of SharpePoint's own, Brian Robinson, CFP®, Financial Advisor and Partner, was featured in USA Today discussing How to Financially Prepare for 2023
https://sharpepoint.com/wp-content/uploads/2022/10/BR-USA-Today-What-to-avoid-10_21_2022.pdf

If you have any questions, call us. Our SharpePoint team of professionals can help guide you to success.

Please contact us via our website or office phone.
Website: www.sharpepoint.com
Office Phone: (480)999-3033

Happy Monday!

One of SharpePoint's own, Brian Robinson, CFP®, Financial Advisor and Partner, was featured in U.S. News discussing How to rebalance Your Portfolio After Retirement.
https://sharpepoint.com/wp-content/uploads/2022/10/BR-U.S.-News-How-to-Rebalance-Your-Portfolio-10_20_2022.pdf

If you have any questions, call us. Our SharpePoint team of professionals can help guide you to success.

Please contact us via our website or office phone.
Website: www.sharpepoint.com
Office Phone: (480)999-3033