It's a Start

…But really, it’s a continuation of things written through the years here at Carson Advisory Group.  Over the years, both my father and I wrote articles for the Athens Banner Herald and intermittent letters to our clients. Now we’re getting back into it.

I’m starting with this note, but over time everyone here will be writing something that they feel is particularly important, under-exposed, and/or timely.

Years ago, in response to the various links I used to send, a wise young man said, “Dad, everybody knows how to google.”  Well, get ready because I have two links to include here. 

The first link addresses bond and stock markets and the relationship between prices and the interest rate environment.  (Real estate, currency and commodity markets are just as impacted by rates but that’s for a deeper dive…and sometimes more of a chicken or the egg question.)

As Warren Buffett says:

“The most important item over time in valuation is obviously interest rates. If interest rates are destined to be at low levels. … It makes any stream of earnings from investments worth more money. The bogey is always what government bonds yield.” 

And we can see that happens repeatedly.  This last year has been a particularly good example. The equity market finally gave up its bullish tone as the Federal Reserve took rates higher and suggested a continuation of their tightening behavior. Then, in January, the Fed reversed course and the shift back into “ownership” assets regained dominance.   

In the midst of all the blogs, news sources and shorter-term oriented television programming, our role is to pay attention to the most important inputs that matter when we determine how to allocate client assets. Relative pricing between asset classes always matters, but interest rates are fundamental to all of that math involved.

Here's the link: https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/

The second most fundamental determinant of investment return is time…and the power of compounding.  Here’s a handy link on compounding:

https://www.businessinsider.com/compound-interest-retirement-funds-2014-3#ixzz2zeTKXrEc

 So, in the short-term, current interest rates (which will change!) suggest leaning to all the “ownership” classes including stocks and real estate. Still, over time, the importance (of shorter-term relative valuations) pales when compared to the power of compounding!

Any opinions are those of Bob Carson and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.  Prior to making an investment decision, please consult with your financial advisor about your individual situation.