Broker Check


| April 20, 2022

Inflation, war, and a pandemic that won’t disappear.  If negative news sells, we should all buy stock in the news companies…just maybe not the newspapers; they seem to be a dying breed since the birth of the internet.  Stock and bond owners alike have been punched in the nose in 2022 and many are trying to recalibrate.  So what works in a market where we know there are challenges that aren’t going to disappear overnight?  Here are a few ideas that have worked in the past along with a few we believe will work well moving forward. 

  •  Dividend Paying Equities – time tested and proven as an amazing wealth creator over time, dividend paying stocks give investors a cushion against down stock prices.  As an example, if you own an equity that pays a 3% dividend yield and the stock price is down 3% over the course of a year then you are even.  Reinvesting those dividends, especially while the stock price is down, is a tailwind for owning more shares sooner or in other words compounding your investment.  Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it”.
  •  Floating Rate Bonds – these bonds or bond funds have a variable interest rate and when interest rates rise, so does the interest the debtor pays and the interest creditors (bond investors) collect.  This is one category of the bond market that has fared better during times of inflation.
  •  Buffered Funds – a  marketable security that can be bought and sold at any time that allow for upside participation, but also protects from losses.  These funds typically allow for about 11% to 13% upside opportunity, but protect against the first 10% of losses.  Most are built to track an index such as the S&P 500 and run on an annual point-to-point measuring period such as May 1st of 2022 to May 1st of 2023.
  •  Buffered Annuities – an relatively new type of annuity that offers protection from losses up to a limit, but also allow for significant participation in upswings in the market.  Some strategies even credit more than 100% of the market’s return.  As an example, in a six year contract, you could invest in a two year strategy that allows for 100% participation in the S&P 500 up to a cap of 36% that also shields you from the first 20% of losses if the S&P 500 were to fall over those two years.
  •  Index Annuities – with no risk of loss on your principal, these contracts give you upside opportunity without any chance of losing money.  The upside opportunity in these contracts has recently increased significantly and you don’t have to lock your money up for a decade.  There are products we like in this space that offer contract periods as short as five years.
  •  Fixed Annuities – with interest rates on the rise you can once again get a guaranteed rate of return that is decent.  Like index annuities above, these annuities have no risk of principal loss.  Right now, the best rates for a 3 year contract are 3.30% with a 5 year paying 3.50%. 
  •  i bonds – We can’t sell you these, but given inflation their popularity has risen quickly.  They must be purchased directly from the US Treasury and each person and limited to buying $10,000 per year.  Here is a  LINK so you can learn more if you have interest.

 And here are a few tips on how to manage inflation:

  •  Make a budget and actually live by it.
  • Track your spending.  You may be surprised how much money can be saved or found just by closely tracking where you spend.
  • Buy gas for your car early in the week and avoid filling up on Friday or Saturday
  • Plan your meals and stick to the list at the grocery store.  Maybe sub in some other forms of protein and skip the meat for a night or two each week.

We hope you find the Weekly Market Review both informative and interesting.  Have a great week!

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Trevor N. Coe, CFP®