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Monday Money Report

| April 04, 2022

We just closed out the worst quarter in two years, down almost 5%. That’s not good news. But a little perspective may make it better. March was solidly a positive month, and we are still positive over the last six months. We’ve had short-term volatility but are overall doing well, with the S&P 500 up almost 10% year-over-year. It’s important to remember that investing is, by definition, a long-term proposition.

More good news is that the jobs report is still positive, oil prices are slowly coming down, and unemployment is low. One warning sign popped up last week when the yield curve inverted for first time since 2019. Historically, the yield curve inverts 12-18 months before a recession starts.  And while every recession since 1956 was preceded by an inversion, not every inversion predicts a recession.

But what is a yield curve? If you graph out interest rates on Treasury Bills, Bonds, and Notes – the government’s debt instruments, you would expect that the longer the length of the bond, the higher the interest rate.  Just like on a CD – you would expect a 5-year CD to pay a higher interest rate than a 6-month CD.  We call that a liquidity premium – having immediate access to your money means you earn less. 

The yield curve naturally starts low and rises as the time for the bond to mature increases. When it inverts, the higher end decreases as investors feel the long-term economic outlook is not good, and begin purchasing more bonds – driving prices up and yields down.

So what does this mean for you? We’re not on the immediate cusp of a recession. Personal finance fundamentals remain the same: build emergency savings, have a plan, and align your investments with that plan.

Your action item to take this week is to check your 401(k), 403(b), TSP, or other employer-sponsored retirement plan.  How are you invested? Is it still an appropriate amount of risk? Are you contributing enough to get the full match? Can you contribute more? Should you be contributing to the Roth option, if you have one? Take some time to go over your account.

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Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.