Author: Innovative Income Investor

I’ve been pondering the effect that the announced tariffs will have on markets on Monday. I can’t think of of reason that this will be well received by markets–stocks or bonds. It could be pretty ugly.

Friday afternoon markets were doing just fine but by early afternoon stocks began to fall and interest rates shot higher–I know my accounts which had been mildly green through the morning ended up red for the day. Overall while it was a reversal it was a reversal off of all time highs–so you know there remain plenty of nervous folks out there looking to take a profit–or looking for a reason to take profits.

I would expect the futures markets to open plenty red tonight–we always get a severe reaction in those markets to weekend news. The question is whether they remain negative all night and then tumble hard tomorrow to start trading? Will markets tumble hard and then bounce back up? Will the tariffs remain in place or do we have a quick reversal like we saw with Columbia last week?

I know one thing for certain–I will not be selling regardless of what happens tomorrow. 1st off there is no advantage to selling–markets will trade immediately to a level which would guarantee one locking in a loss. I think one should take a deep breath and then determine whether to simply stand pat and/or look for something to buy–although buying too soon can cause a lot of pain.

Well it is 3 pm (central) so it will be some hours because we see various markets open–and there is not one darned thing I can do before tomorrow so no use worrying about it.

Well we wrap up the month with economic news that was pretty much on forecast–although not showing any gain in the fight against inflation. Today’s personal consumption expenditure report did not give the FOMC any reason to consider lowering the Fed Funds rate anytime soon. So we can take lower short interest rates off the table for the next 6-7 weeks since the next FOMC meeting doesn’t happen until March 18-19.

We are in kind of a Goldilocks market for now–although common stocks continue to climb a wall of worry–plenty of uncertainty out there to worry about. Seems like we may have interest rates trade in a somewhat narrow range for the next few weeks–maybe a 10-20 basis point ranges (although one never knows for sure).

At this moment I am feeling really good about my positioning in my portfolios. These high CD and money market rates (high is a relative term) have allowed me to have 1/2 the funds in safe investments without worry. Add in a fair portion of high yield, short duration issues with a sprinkling of perpetuals of various types and I end up with my best month in the last 4 months. My gain is around .6%–kind of meager, but the previous 3 months were about that month combined. As I look back on the last 2 years one could get addicted to months that had 1-2% gains–that was so nice, but I don’t foresee those kind of gains happening again for this year. I think it will be a struggle to maintain a 6-7% annualized gain–I am hopeful, but not entirely confident.

Looking at the important economic news today I am thinking it is kind of ‘goldilocks’ in nature.–the 1st read on GDP coming in at 2.3% was a couple basis points lower than expectations. The economy is still moving forward, but at a modest pace–this is a positive for potential future rate cuts (by the FOMC). On the other hand 1st time unemployment claims were way down at 207,000–way below expectations at 228,000 so plenty of folks are staying employed–don’t know if this will continue at the Federal government as we move forward.

We get the last big news of the week tomorrow when the personal consumption expenditures number (PCE) is released. This is forecast to be up from last month–so balancing the slightly softer GDP today as well as the low unemployment claims. Of course any hot or cool number changes everything.

This morning I nibbled on a issue–adding to holdings already in the portfolio which was a small position. I added a small amount of the RiverNorth Double Line 6% term preferred (OPP-C) which has traded very flattish since issuance in October. I really need to buy something other than CDs and money markets at 4.2% (or whatever low coupon).

I remain of the mind that the 10 year treasury will remain in a range of 4.25% to 4.75% for months to come and holding too many perpetuals with lower coupons remains dangerous. Perpetuals have gotten a bounce as rates moved from 4.80% to 4.50%, but will this continue? Time will tell.