This year, interest rates have increased dramatically, leading to significant declines in bond prices. You may be most aware of this if you own a bond mutual fund or ETF.
Many business owners and investment professionals believe the Fed’s actions to reduce inflation will result in a recession. Last week, the Federal Reserve (Fed) hiked the Fed funds rate by 50bp to 0.75-1.00%, the first back-to-back hike since the second quarter of 2006, with expectations of a series of rate hikes.
Just slightly over one year ago, inflation was not a concern; since then, it has spiked enormously and reached levels not seen since the late 1970s and early 1980s. Right now (late April 2022), inflation is over 8%, as measured by the consumer price index, and the latest producer price index increased at an annual rate that exceeds 10%. Building a balanced portfolio means combining different asset classes that can respond positively to other economic conditions. Having Natural Resources and Real Estate is essential since they can provide some protection against inflation.