Market Minute on Finance Friday

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The Fed announced that it would continue its efforts to keep interest rates low until the unemployment rate falls to 6.5% or inflation forecasts rise above 2%. Based on the Fed’s own economic projections this means interest rates are likely to stay low through 2015.

This announcement provides clearer insight into the likely direction of interest rate movements. For investors looking to purchase interest-bearing investments to generate income, the news is disheartening. On the other hand, the status quo is good news for investors currently holding interest-bearing investments. Due to the inverse relationship between prices and interest rates, a rise in rates would reduce the value of existing holdings.

For consumers and businesses seeking loans, the news should be welcome. Low rates make for lower payments. For the financial markets overall, it suggests that 2013 is likely to bring more of the same conditions we have seen this year.

Look for a holiday edition of our next Market Minute on Friday, December 21.

Market Minute on Finance Friday

Speculation about the fiscal cliff continues to dominate the news cycle. Financial markets are watching, waiting and doing little else.

The current situation highlights just how much markets dislike uncertainty. Until we see a resolution to the issue backed by positive economic trends, the status quo is likely to remain firmly in place.

Speaking of positive economic trends, the most recent jobs report showed a gain of 146,000 jobs in November, helping push the unemployment rate to 7.7%. This brings the unemployment rate to its lowest point since 2008.

The decline in unemployment is positive news and pushed stock prices higher, but long-term trends are what make for meaningful and sustained upside movements.

Looking past the short-term news, the stock market has been on a slow upward trajectory. While most investor would like to see faster, stronger gains, seeing slow, steady gains is better than seeing no gains at all. For now, we’ll continue watching and waiting.

One Step at a Time

At the age of 36, I was diagnosed with type 1 diabetes. This came with no family history and no warning. Being a husband and father of two young boys I was determined to overcome this disease and I was NOT going to let it limit my life. I decided to do something extraordinary in an effort to motivate and inspire other people struggling with diabetes. Despite never having done a triathlon before and not knowing how to swim, I decided to accomplish what most consider the ultimate test of mental and physical endurance – the Ironman triathlon.

There are a lot of parallels between what it takes to manage a disease like type 1 diabetes and what it takes to train for and finish a race that consists of a 2.4 mile swim, 112 mile bike and a 26.2 mile run. Diabetes is a relentless, oftentimes mind-numbing disease; there is no off switch and you can never let your guard down…I have to weigh the food I eat, count every carbohydrate that goes into my body, test my blood sugar 10, 15, sometimes 20 times a day, and make sure I am giving myself enough insulin to cover the carbohydrates. I also have to balance that with physical activity.

Ironman is exactly the same.  Most people consider a marathon to be an amazing feat, but when I have been on my bike for five or six hours the last thing I can think about is the fact that I still have to run a marathon. I get off the bike and just keep telling myself “one step at a time…left foot, right foot.” If I get caught up in the enormity of the marathon, it will crush my spirit.

You can look at investing for retirement the same way that I look at diabetes and triathlons.  First, you have to have a sound plan…you can’t just wing it. Next you have to take a multi-disciplinary approach. I can’t just focus on my swimming and biking and not running, I see these people a lot – they have a good swim, they hammer the bike, and then get crushed on the run.  In a way it’s a lot like a diversified portfolio; you need exposure across the board to succeed in the long run. Also, you can’t look at your account statement everyday and get caught up in the daily gyrations of the market.

Look at your retirement portfolio like you look at training for a race – have a diversified plan, be disciplined, and remember that you are in it for the long haul…the first athlete out of the water is rarely the first one across the finish line.

Iron Andy Holder – husband, father, type 1 diabetic, investor, and 8-time Ironman Finisher