August 2016 Newsletter to Clients

Enjoy this month’s edition that features an update on the economy, financial markets and client seminar invitation.

Economy Overview: The U. S. economy is experiencing moderate growth, 1.2% per quarter for the last four quarters. This meager growth rate concerns some economic wizards and stock market mavens but it’s fairly obvious the real stock market investors remain unconcerned. 

Stock & Bond Markets: The American stock market per the Dow Jones Industrial Average is off its high of 18,622 but remains well over 18,000 at this writing. The bond market remains enormously popular among the majority of investors. Long term rates, ten to thirty years in terms of maturity, are at record lows. The U. S. 10-year Treasury note rate is 1.49% and the U. S. 30-year Treasury bond rate is 2.23%. Low interest rates suggest fear of deflation, economic upheaval or a simple lack of alternative investments. Many investment firms, banks and insurance companies have a huge amount of money flowing into their coffers which must be invested. Most of this money cannot be invested in the stock market or real estate so the bulk of the funds go into bonds. 

The bright light in the bond market in terms of yield is adjustable or variable rate instruments also known as floating rate notes, bonds and bank loans. Floating rate bank loans normally refer to senior secured loans to corporations. Let us expand. Senior means that the loan is first in line to be repaid in the event of potential default or bankruptcy. Secured refers to the fact that the loan is backed by collateral. A bankruptcy example will illustrate the ultimate safety of bank loans. A cable TV provider files for bankruptcy with the hope of continuing in business after it reorganizes. This company continues to pay interest on those bank loans which are secured by the equipment which it needs to continue to provide cable service in its market. The unsecured creditors (lenders) were the losers in this case, but NOT the holders of these senior secured bank loans.

It has come to my attention that our newsletter is experiencing poor or limited readership and I personally appeal to you to communicate to us what we have to include to induce larger readership.

Client Seminar and Lunch:

• Date: August 17th at noon.
• Where: Coles on Main Restaurant, 735 East Main Street (Ashland Ave. & Main St.) Lexington, KY 40502
• What’s happening: Lunch and a talk/Q&A with Lord Abbett Fund Management on the economy and today’s stock and bond markets outlook.
• Reserve: Limited to 30 people, so go ahead and request a spot now. RSVP to Robert Hammond at (859)230-8387 (cell) or Robert@moneywatchadvisors.com (email) or by calling the Lexington office, (859)268-1117.

Thank you for your continuing confidence.

Past performance is no guarantee of future results. The opinions expressed are those of Moneywatch Advisors, Inc. and are no guarantee of the future performance of any particular fund. This information is for educational purposes only and is not intended as investment advice. Please consult your financial advisor for more detailed information or for advice regarding your individual situation.​