Today, we’re facing the possibility of an increase in short-term interest rates thanks to the slow — but consistent — improvement in the economy. This has several implications. As Investment Managers, we foresee a gradual increase in short-term interest rates in the coming 2 years, so it’s our commitment and responsibility to adapt our clients’ investments accordingly. As we’ve seen in past periods of increasing rates, in most cases the returns on equity investments have been positive. However, it’s more important than ever to resilient companies with sound financial situations that show consistent results and are fairly priced by the markets. This is the same strategy that we apply to fixed-income investments. It’s not a simple matter of length of investment, but of credit quality and price. The important investment principle to keep in mind is not to invest or disinvest out of fear or lack of understanding, but to invest prudently, taking into account the long-term cost of not investing — the time value of money.
ABOUT THE AUTHOR
› Claudia Batlle is an Investment Manager at VectorGlobal IAG Registered Investment Advisory, Product Analysis Director at VectorGlobal WMG and a Broker/Dealer & Member of the Investment Committee for both. She has expertise in international fixed-income and equity investments; VectorGlobalWMG.com.
Fed Facts
While “The Fed” is a fixture of modern life, it wasn’t until “The Panic Of 1907” that Americans realized the critical need for a central bank. As such, President Wilson signed the Federal Reserve Act on Dec. 23, 1913.
War Funds
The Federal Reserve does more than print money and influence interest rates, it facilitated the sale of Liberty Bonds during WWI to the general public.
Gone Gold
In 1934, the Gold Reserve Act transferred ownership of the Fed’s gold to the Treasury at a rate of $35 per ounce of gold. My, how times have changed.
National Accountant
The Federal Reserve is the official fiscal agent for the U.S. Government. It maintains the Treasury’s checking account and processes all electronic payments.
