Watch Out For the Bond Bear Market

This is the latest article written by Kevin McNab published in ColoradoBiz Magazine.  Many investors are going to be surprised when they see a decrease in their bond funds.  This article touches on why a bond fund will decrease in value and some of the alternative assets classes if an increase in interest rates is expected.

As investors saw their nest egg deteriorate in the great recession of 2008, many moved their money into bond funds as a safe haven to protect their assets from decreasing stock prices. During this time, interest rates decreased to near zero and continued to remain at record lows. As a result, bond funds flourished. Investors became comfortable with bond returns even as they missed out on the continued stock market recovery.

The Federal Reserve already took action to raise the Fed Funds rate last December. Now with the anticipation of two more rate hikes by the end of this year and signs of inflation, many experts are predicting an increase in interest rates. As Warren Buffet said last year in an interview with CNBC, “I think bonds are very overvalued.” Although counterintuitive, when interest rates rise, the price of bonds decrease. As the price of bonds decrease, investors will see depreciation in their bond funds. In other words, they will lose money. So what should investors do in a time of rising interest rates?…READ MORE!

Kevin McNab

This article is written by Kevin J. McNab. Kevin is President of ACE Wealth Partners, LLC and is a CFP®, ChFC®, and CRPC®. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by ACE Wealth Partners, LLC unless a client service agreement is in place. If you have any questions regarding this Blog Post, please Contact Us. Please read our website DISCLOSURE carefully for additional information.