Tuesday, December 19, 2017

Stocks or Bonds or ?

Its getting pretty close to Christmas and like many of us the congress is about to give a present they can't afford, meaning they will have debt they have to pay off.

Luckily with all the debt they pile up the interest rates have been very favorable.

If they had to pay Credit Card rates or anything close the nation would be in deep trouble.

Of course interest rates are likely to go up, how much is the question?

The Fed has raised them modestly and is planning additional hikes.

So far, based on the promised additional profits the stock market hasn't reacted negatively, but if the old stock advice is still valid, buy on the rumor, sell on the news, when the tax law gets passed, it might react negatively.

Expectation often exceeds the reality so that advice is pretty sound, although none of it is always right.

If interest rates are expected to rise, you expect the price of bonds to go down since they have to equal the current going rate.

So anticipating a fall in bond prices you keep your money elsewhere.

Stocks are the logical choice.

The move in interest rates has been slow though so the question becomes at what point are Bonds better than stocks?

Probably best to wait until next year to avoid the tax bite.








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