“We’ve gotten used to thinking of a zero interest rate as normal—it’s far from normal.”
Fed Vice Chairman Stanley Fischer
I wrote a piece in Forbes this week titled “Rate Hike Ahead, Bond Model Says Sell”. The gist of the piece is about a tug of war between opposing views on the direction of interest rates. The outcome of this contest will enrich some and demoralize others.
Trend evidence suggests that rates are moving higher. As you may know, we rebuilt a model with the help of our friends at Ned Davis Research that the late great Marty Zweig created in the mid-80s. It signaled this week that the trend in rates has changed, suggesting it is best to shorten maturity exposure. I share a few ideas in the Forbes piece.
I’m not sure just how valuable a 10-year Treasury paying 2.10% is to a portfolio. Yet the total return would be very nice indeed should rates fall to 1% by year end. Conversely, because the starting place is low, the risk of loss is exponentially elevated than if rates were at, say, 4%. I conclude that now, more than ever, is the time to have a tactical process in place that can help you manage your duration exposure.
Founder & CEO CMG
Stephen Blumenthal founded CMG in 1992. He is CEO, Chief Investment Officer and portfolio manager at Capital Management Group, Inc. where he manages equity and tactical investment portfolios. He is a frequent speaker and writer on investment strategies and has been featured in various media sources including the Wall Street Journal, Barron’s, Investor’s Business Daily, Pensions & Investments Magazine, Investment News, RIA Biz and Smart Money. He has been a guest on CNBC, Wall Street Journal Live, and Bloomberg. Mr. Blumenthal is a frequent speaker at industry conferences (NAPFA, IMCA, Index Universe, Opal Financial Group Indexing & ETF Summit and NAAIM) and is author of CMG’s popular investment research commentary. With 30 years of investment management and industry experience, prior to founding CMG, Mr. Blumenthal worked for Merrill Lynch Institutional, Merrill Lynch Retail and Prudential Securities.
Mr. Blumenthal graduated with a Bachelor of Science degree in Accounting from Pennsylvania State University. He is married, has three children and is active in his community coaching youth soccer.