In earlier articles I covered the terms bond tapering and quantitative easing (QE for short). In this article I want to talk little about quantitative tightening or QT. QT has garnered a lot of interest from market participants since the U.S. Federal Reserve Bank (Fed) hinted, at its last meeting in December, that interest rate adjustments are likely this year to counteract high and persistent inflation. So, what is QT, how is it related to tapering and or QE and what are the implications for markets and investors?

Ever noticed how many animal-related references are used in the finance world? In the past we have written articles about pigs, wolves, bunny markets, and more recently explained a bull versus a bear market. Yet, we still haven’t covered all the animal terms- it’s a real jungle out there!

With higher interest rates on the horizon, investors may be hesitant to purchase bonds right now or be worried about erosion in the value of bonds already in their portfolio, since interest rates and bond prices move in opposite directions. However, it is important, now more than ever, for investors to remember that bonds are intended to be medium to long-term investments and therefore cash flow, not trading gains and losses, should be the key consideration for individual investors. Nevertheless, there are numerous strategies an investor can employ in the face of a rising interest rates.

How often have you heard someone say, “I made so much money in the stock market today”? I personally hear it very often, especially when stock markets are doing so well. When someone says that I always get worried because it is usually not true. Before you crucify me, I am not saying that these people are liars. They have just fallen victim to a common misconception when investing- that you make money when your investments go up in value and you lose money when they go down.

With the U.S. Federal Reserve Bank (Fed) chairman, Jerome Powell, signaling a faster pace of tapering or reduction of monthly bond purchases (liquidity support) ahead of Wednesday’s FOMC meeting, in response to hotter than expected inflation, market watchers and investors anxiously awaited the Fed’s next big reveal– the FOMC dot plot. So, what are the Fed’s dot plots and how useful are they for investors? 

As interest rates fluctuate or decline many investors often seek new products or consider restructuring their portfolio. Understandably declining rates can give rise to feelings of fear, anxiety or second guessing your investments. Investors who actively monitor their investments may become disenchanted with lower rates and begin to wonder what products they could take advantage of in their quest to have higher yields. There are many new issues in the market including local corporate and international bonds.

Before making any investment decision, it is important to first determine the objective of the investment and how it is aligned to your investment goals. By defining your goal, one can determine if the appropriate investment will need to provide growth, income, or a combination of both.

Broadly speaking, financial markets are made up of investors and speculators. Investing and speculating are not the same. The terms are often used synonymously due to common characteristics that they share and in today’s complex financial markets the line between the two has become blurred. However, there are key differences that you should understand to make sure that you are participating in something that is appropriate for you.