By Drew O’Neil
For the past few months, interest rates have been trading in a fairly tight range as traders can’t seem to decide which directions rates are/should be heading. For those of us without a working crystal ball, the future is always uncertain. Predicting the future is impossible but oftentimes if you take the time to give something a fair amount of thought, you can come up with an educated guess as to what the logical likely outcome might be. But taking a look around at the current economic and political landscape, something seems different and even the clearest crystal balls seem cloudier than usual. Maybe it’s just that our confidence shattered after the “expert” predictions and polls that are typically taken as gospel have been failing us recently (recall the predictions pre-Brexit vote and pre-2016 Presidential election), or maybe we are just in unprecedented times.
There are many things “up in the air” right now, which, depending on their outcomes, could swing things one way or the other. In an attempt to highlight the uncertainty, a few of these potentially market-moving events/non-events are noted below.
We could come up with 50 more bullet points if we wanted to, but you get the point. There are so many uncertainties that could potentially affect the market in the near to intermediate future that trying to paint a picture of what the world is going to look like a year from now is impossible. Predicting the outcome of any one of these situations is hard enough. Now try correctly predicting the outcomes of all of them and modeling how their combined results are going to interact with each other. Next, take that hypothetical situation and tell me exactly what the effect is going to be on financial markets. How’s your crystal ball look now?
So what does this mean for investors today? Don’t try to predict the future, it is a fool’s errand. Take a look at the current landscape, assess your individual goals. Figure out how you can accomplish those goals based on the current environment, NOT on what the world may or may not look like in the future.
To learn more about the risks and rewards of investing in fixed income, please access the Securities Industry and Financial Markets Association’s “Learn More” section of investinginbonds.com, FINRA’s “Smart Bond Investing” section of finra.org, and the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market Access System (EMMA) “Education Center” section of emma.msrb.org.
The author of this material is a Trader in the Fixed Income Department of Raymond James & Associates (RJA), and is not an Analyst. Any opinions expressed may differ from opinions expressed by other departments of RJA, including our Equity Research Department, and are subject to change without notice. The data and information contained herein was obtained from sources considered to be reliable, but RJA does not guarantee its accuracy and/or completeness. Neither the information nor any opinions expressed constitute a solicitation for the purchase or sale of any security referred to herein. This material may include analysis of sectors, securities and/or derivatives that RJA may have positions, long or short, held proprietarily. RJA or its affiliates may execute transactions which may not be consistent with the report’s conclusions. RJA may also have performed investment banking services for the issuers of such securities. Investors should discuss the risks inherent in bonds with their Raymond James Financial Advisor. Risks include, but are not limited to, changes in interest rates, liquidity, credit quality, volatility, and duration. Past performance is no assurance of future results.