You can't fight the Fed

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smooth_rough
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You can't fight the Fed

Post by smooth_rough »

You can't fight the Fed. If you believe we are in period of rising interest rates for the next 2.5 years, what strategies are you implementing to hedge against rising rates, investing within the vanguard family of funds, or elsewhere?
Last edited by smooth_rough on Tue May 17, 2022 10:13 am, edited 1 time in total.
drk
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Re: You can't fight the Fed

Post by drk »

Welcome to the forum! Consider reviewing the Bogleheads Investment Philosophy, in particular Never try to time the market.

As for your question, your premises are false: I can fight the Fed, and I'm agnostic about whether "we are in period of rising interest rates for the next 2.5 years."
A useful razor: anyone asking about speculative strategies on Bogleheads.org has no business using them.
secondopinion
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Re: You can't fight the Fed

Post by secondopinion »

smooth_rough wrote: Tue May 17, 2022 9:51 am You can't fight the Fed. If you believe we are in period of rising interst rates for the next 2.5 years, what strategies are you implementing to hedge against rising rates, investing within the vanguard family of funds, or elsewhere?
I am doing nothing. I already sold essentially all my bonds in 2020 for a 3% CD maturing in two years now; the reason I could get phenomenal rates at the time is that I bought an add-on CD in 2019, but it was meant as a hedge for my emergency fund rates and not exactly my investments. How the market does strange things; I just could not resist selling when treasuries were <1% for nearly every term at the time and I could get 3% to accelerate most of the yield.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Onlineid3089
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Re: You can't fight the Fed

Post by Onlineid3089 »

I'm just standing here doing nothing. Our regular automated contributions to VTSAX in taxable and target date funds in tax advantaged keep on happening like clockwork.
case_of_ennui
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Re: You can't fight the Fed

Post by case_of_ennui »

The strategy I'm following is my IPS. Nothing in there about needing to make changes based on whether rates are rising or falling.
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arcticpineapplecorp.
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Re: You can't fight the Fed

Post by arcticpineapplecorp. »

if 67 economists predictions were wrong over a short (6 month) period of time, what makes you think you will do better:

Image

source:
https://web.archive.org/web/20220517151 ... 2014-10-21

control what you can and don't worry about what you can't. market returns are not within your control but asset allocation and asset location are:

Image

source:
https://am.jpmorgan.com/us/en/asset-man ... etirement/

your returns come from stocks, not bonds. So determine:

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

can you tell us where the Fed said they're raising rates over the next 2.5 years?? I can't seem to find that anywhere on the internet.

I've heard they could continue to raise rates into next year but I haven't heard/seen anything beyond that.

don't you think the announcement of rising rates has already been priced in already? Why would the 10 year t note be paying close to 3% when it was paying 0.58% in 2020. Has the Fed raised interest rates 2.5% since then? No. Not yet. But they're projected to raise like 7 more times if at 0.25% each time (who knows though, most recent was 0.50%) would be 1.75%. If you wanted to have hedged, you should have done it between 2020 and 2021, not now. The announcement has already risen rates. Not saying they won't/can't go higher, but they've raised enough to cause a loss of around 10% or so for total bond in the first half of the year. You're late to the game.

Don't try to time this. Hold the percentage of stocks and bonds that meets your needs for return and accepts the amount of risk you have the need, ability and willingness to take.

A portfolio is not supposed to be something you're changing constantly every time something changes in the economy, inflation, country, etc. A well designed portfolio takes the market changes into consideration and all you need to do is buy (repeatedly) and hold for the long term.
Last edited by arcticpineapplecorp. on Tue May 17, 2022 10:29 am, edited 2 times in total.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
adamthesmythe
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Re: You can't fight the Fed

Post by adamthesmythe »

If I had to guess, I would guess that interest rates will rise then fall again within 2.5 years.

But then I don't have to guess, so I won't.
Ramjet
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Re: You can't fight the Fed

Post by Ramjet »

Everyone seems to be just telling you that you are wrong instead of answering what you actually asked

Value is/should do well
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arcticpineapplecorp.
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Re: You can't fight the Fed

Post by arcticpineapplecorp. »

Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked
how about this then:

buy bonds now.

why?

they're cheaper now when 10 year is close to 3% then they were 2 years ago when they were at 0.58%

also, what if the fed is too aggressive and causes a recession? what do you (OP) think would happen to rates then?

they'd go down, not up.

that would make you money (on rising principle with less income going forward).

but you won't get that capital appreciation if you don't own bonds now (before rates fall...if they do...if there's a recession).
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Carol88888
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Re: You can't fight the Fed

Post by Carol88888 »

The Fed doesn't even know what it is going to do over the next 2.5%. Yes, there will be .50 basis hikes in both June and July.

But since that has already been announced it is probably priced in.

After that, the Fed will look at incoming data.
atdharris
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Re: You can't fight the Fed

Post by atdharris »

I am doing nothing. I was 100% equities in my brokerage accounts and I will remain that way. At 33, I see no need for bond funds, especially in a rising rate environment.
Broken Man 1999
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Re: You can't fight the Fed

Post by Broken Man 1999 »

I have made no changes to our portfolio, and don't expect to make any UNLESS we hit a rebalance point.

Broken Man 1999
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jebmke
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Re: You can't fight the Fed

Post by jebmke »

Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked

Value is/should do well
I read the OP twice. The only question was "what are you doing ..." Many people have said "nothing" and then elaborated why.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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smooth_rough
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Re: You can't fight the Fed

Post by smooth_rough »

Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked

Value is/should do well
Value stocks outperformed during high inflation and interest rate environment of the 1970s. Are you shifting into one of vanguard value funds? Or other?
Ramjet
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Re: You can't fight the Fed

Post by Ramjet »

smooth_rough wrote: Tue May 17, 2022 12:38 pm
Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked

Value is/should do well
Value stocks outperformed during high inflation and interest rate environment of the 1970s. Are you shifting into one of vanguard value funds? Or other?
If I was shifting to value I would use Avantis Funds, here are a few:

US SCV: AVUV
INTL SCV: AVDV
EM Value: AVES
secondopinion
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Re: You can't fight the Fed

Post by secondopinion »

Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked
Please read all the posts before you say everyone. I did exactly what was asked; therefore, that is not everyone.

But I will say the action was most needed in 2020, preemptive to the Fed saying anything. I do not know what more can be done here once the damage is done.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Ramjet
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Re: You can't fight the Fed

Post by Ramjet »

secondopinion wrote: Tue May 17, 2022 1:56 pm
Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked
Please read all the posts before you say everyone. I did exactly what was asked; therefore, that is not everyone.
Don't be silly. I'm not going to go and tally the number of posts and make a count and say 8 out of 10 people didn't answer your question. I will use generalities like a normal person. That is a weird thing to get offended by
secondopinion
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Re: You can't fight the Fed

Post by secondopinion »

Ramjet wrote: Tue May 17, 2022 3:13 pm
secondopinion wrote: Tue May 17, 2022 1:56 pm
Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked
Please read all the posts before you say everyone. I did exactly what was asked; therefore, that is not everyone.
Don't be silly. I'm not going to go and tally the number of posts and make a count and say 8 out of 10 people didn't answer your question. I will use generalities like a normal person. That is a weird thing to get offended by
I am not offended; generalities like these always seem to leave me puzzled because they are not entirely accurate. I guess that is the math major in me to get stuck on the definition of "everyone".

Please do not take my post offensively; I sometimes get stuck on words.
Last edited by secondopinion on Tue May 17, 2022 3:22 pm, edited 1 time in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Californiastate
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Re: You can't fight the Fed

Post by Californiastate »

Threadlock in 3……2
Ramjet
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Re: You can't fight the Fed

Post by Ramjet »

jebmke wrote: Tue May 17, 2022 12:15 pm
Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked

Value is/should do well
I read the OP twice. The only question was "what are you doing ..." Many people have said "nothing" and then elaborated why.
You are not incorrect, but I think it is safe to say that it is inferred that the OP wants to hear from people that have taken action or at the very least will give a suggestion and not just say that they are doing nothing and telling him he should do nothing too. If I am wrong OP can speak up and I will gladly apologize for posting the comment!
Ramjet
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Re: You can't fight the Fed

Post by Ramjet »

secondopinion wrote: Tue May 17, 2022 3:21 pm
Ramjet wrote: Tue May 17, 2022 3:13 pm
secondopinion wrote: Tue May 17, 2022 1:56 pm
Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked
Please read all the posts before you say everyone. I did exactly what was asked; therefore, that is not everyone.
Don't be silly. I'm not going to go and tally the number of posts and make a count and say 8 out of 10 people didn't answer your question. I will use generalities like a normal person. That is a weird thing to get offended by
I am not offended; generalities like these always seem to leave me puzzled because they are not entirely accurate. I guess that is the math major in me to get stuck on the definition of "everyone".

Please do not take my post offensively; I sometimes get stuck on words.
Understand, no offense taken here. Shouldn't have assumed you were offended.
Ramjet
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Re: You can't fight the Fed

Post by Ramjet »

Ramjet wrote: Tue May 17, 2022 3:23 pm
jebmke wrote: Tue May 17, 2022 12:15 pm
Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked

Value is/should do well
I read the OP twice. The only question was "what are you doing ..." Many people have said "nothing" and then elaborated why.
You are not incorrect, but I think it is safe to say that it is inferred that the OP wants to hear from people that have taken action or at the very least will give a suggestion and not just say that they are doing nothing and telling him he should do nothing too. If I am wrong OP can speak up and I will gladly withdrawal that comment!
z3r0c00l
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Re: You can't fight the Fed

Post by z3r0c00l »

I actually have taken action, I selected a short term bond fund over total bond recently. It should offer roughly half the volatility for, at this time, .2% less yield. I simply didn't think that trade was worth it with the distinct possibility of higher interest rates to come. Not from the Fed mind you, but from the bond market. At some point I don't see people lending money at 3% if inflation stays above 6%.
70% Global Stocks / 30% Bonds
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vineviz
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Re: You can't fight the Fed

Post by vineviz »

Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked
When the question is "what's the best way to try to time the bond market", the only reasonable answer is "don't".
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
2pedals
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Re: You can't fight the Fed

Post by 2pedals »

My IPS does not address "fighting the fed" or not. The IPS, is a long-term plan that hopefully will enable me to be able to stay the course during both monetary easing and monetary tightening periods. My IPS is flexible enough that I can shift my fixed income investment types. I can invest in various forms of fixed income types, stable value, I-bonds, EE-bonds, CDs, bonds, TIPS, etc. I do not purchase long-duration bonds. I have been using stable value funds. Via Rollover IRAs, I have started to nibble on short-duration TIPS at the expense of not being able to access the stable value fund with that money ever again. The stable value fund I have access to has been slow to increase interest rates. Is this something so important that I need to "take action" or more action? Probably not but it does make me feel better than I am doing something even when it propably won't matter much or not at all.
secondopinion
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Re: You can't fight the Fed

Post by secondopinion »

Ramjet wrote: Tue May 17, 2022 3:25 pm
secondopinion wrote: Tue May 17, 2022 3:21 pm
Ramjet wrote: Tue May 17, 2022 3:13 pm
secondopinion wrote: Tue May 17, 2022 1:56 pm
Ramjet wrote: Tue May 17, 2022 10:28 am Everyone seems to be just telling you that you are wrong instead of answering what you actually asked
Please read all the posts before you say everyone. I did exactly what was asked; therefore, that is not everyone.
Don't be silly. I'm not going to go and tally the number of posts and make a count and say 8 out of 10 people didn't answer your question. I will use generalities like a normal person. That is a weird thing to get offended by
I am not offended; generalities like these always seem to leave me puzzled because they are not entirely accurate. I guess that is the math major in me to get stuck on the definition of "everyone".

Please do not take my post offensively; I sometimes get stuck on words.
Understand, no offense taken here. Shouldn't have assumed you were offended.
No worries here.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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smooth_rough
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Re: You can't fight the Fed

Post by smooth_rough »

Powell says the fed will not hesitate to keep raising rates...

https://www.cnbc.com/2022/05/17/powell- ... -down.html
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vineviz
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Re: You can't fight the Fed

Post by vineviz »

smooth_rough wrote: Tue May 17, 2022 4:35 pm Powell says the fed will not hesitate to keep raising rates...

https://www.cnbc.com/2022/05/17/powell- ... -down.html
He also says the fed will not hesitate to STOP raising rates.
If things come in better than we expect, then we’re prepared to do less. If they come in worse than we expect, then we’re prepared to do more.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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jeffyscott
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Re: You can't fight the Fed

Post by jeffyscott »

arcticpineapplecorp. wrote: Tue May 17, 2022 10:21 amdon't you think the announcement of rising rates has already been priced in already? Why would the 10 year t note be paying close to 3% when it was paying 0.58% in 2020. Has the Fed raised interest rates 2.5% since then? No. Not yet. But they're projected to raise like 7 more times if at 0.25% each time (who knows though, most recent was 0.50%) would be 1.75%.
Yes, in fact there's about an 87% chance of a 0.5% increase (and a 13% chance of 0.75%) in June that is priced in, based on this: https://www.cmegroup.com/trading/intere ... -fomc.html

Longer term median expectation based on that site is that the Fed tops out at about 3.25% by Feb/Mar 2023.

The higher actual interest rates for 1 year+ that have already occurred, rather than any guesses about future Fed action, led me to not renew a CD at 2%. Instead that money was sent back to brokerage account to invest in a mix of short term nominal bond fund, brokered CDs, intermediate TIPS, and TIPS index fund. This represents about 6% of our assets. The only other change is that I may also redirect some of our (nominal) bond fund dividends to a TIPS index fund.
mary1492
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Re: You can't fight the Fed

Post by mary1492 »

.....
Last edited by mary1492 on Fri Sep 30, 2022 4:36 am, edited 1 time in total.
Tinyz
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Re: You can't fight the Fed

Post by Tinyz »

Generally, commodities or stocks(companies) that produce goods with inflexible demand or anything that can pass on the cost, really.
Call_Me_Op
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Re: You can't fight the Fed

Post by Call_Me_Op »

Remember that the consensus is already baked-into both stock and bond prices. That is, everybody expects the Fed to raise the discount rate several times this year, etc. So while the discount rate will be rising, and that means the 13-week TBill rate will be rising, this does not dictate the behavior of bonds with longer duration - or stocks for that matter.

The most prudent approach remains, IMO, to make a plan, write it down, and stick to it.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
KlangFool
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Re: You can't fight the Fed

Post by KlangFool »

OP,

No changes on my part. 40% of my portfolio is in the Wellington fund. I would let my fund manager to actively deal with this kind of stuff. They are paid hundred of millions to deal with this kind of uncertainty. I only paid 0.16% annually for this service.

KlangFool
Last edited by KlangFool on Wed May 18, 2022 7:45 am, edited 1 time in total.
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student
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Re: You can't fight the Fed

Post by student »

The only change that I plan to do is watch for better rate for my cash. Currently, I am using HYSA but they are not as competitive as before.
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