Interest Rates and the Current Financial Markets

Sam Ngooi Comments

At the end of October, the Federal Reserve reduced the short-term interest rate it controls by a quarter percentage point (1/4%), the third such decrease during 2019. Ten-year US Treasury yields continue below 2%, although they have now moved higher than the three-month yield, reversing at least for now the so-called “inverted yield curve.” This unusual circumstance describes a time …

Impeachment and the Financial Markets

Sam Ngooi Comments

The financial media continues to assign reasons for current stock and bond price movements, up and down, including: (a) the extent of economic slowdown in the US and internationally; (b) progress, or lack thereof, in the ongoing trade war with China and other countries; and (c) the Federal Reserve’s willingness, or reluctance, to continue lowering interest rates to stimulate economic …

Early Lessons About Money

Sam Ngooi Comments

Usually in our Monthly Comments, we share our observations about the financial markets. But this month, we’d like to shift the focus, onto some thoughts about how we live with money. We start with a question: How did you learn your early lessons about money?  Was it from your family? Or maybe from your friends? Were you in a classroom, …

August 2019 Financial Market Volatility Update

Sam Ngooi Comments

In our most recent July 2019 Monthly Comments, we discussed the media coverage of early August stock price volatility on days when prices were lower. Key market movers were presented as 1) the direction of interest rates; 2) tariff and currency disputes with China; and 3) the inverted yield curve for ten-year and three-month US treasuries, perhaps signaling an economic …

July 2019 Comments: Early August Volatility for Stock & Bond Prices

Sam Ngooi Comments

After relatively modest price changes during July in both stock and bond markets, early August witnessed a return of substantial stock and bond price volatility. Although the recent declines (and gains) appear large in absolute numbers, the important figures are the percentage gains and declines. A drop of 500 points on the Dow, for example, sounds huge, but at current …

June 2019 Comments: Impact of Economic Recession on Stock & Bond Prices

Sam Ngooi Comments

During June, stock and bond prices in the US increased. Some of the likely reasons for these increases seemed to be contradictory, but all centered on the likelihood that an economic recession may be on the horizon. A recession refers to an economy that has two consecutive quarters of negative gross domestic product (GDP) growth. In the current economic and …

March 2019 Comments: Inverted Bond Yield Curve

Sam Ngooi Comments

As has been discussed in many previous Comments, interest rates (also called yields) are typically higher on longer maturity bonds, to compensate for the greater price risk associated with having to wait longer to get the initial principal back, called “maturity.” At maturity, investors can buy new bonds at then-current interest rates. When yields on longer bonds fall below those …

February 2019 Comments: Spending Income or Spending Total Return

Sam Ngooi Comments

Most clients, when starting to use their investment portfolios for part or all of their spending, have as an objective to spend the income but not the principal. We would like to take this opportunity to discuss this objective and why it is so difficult to achieve in a low-interest rate environment. First, some definitions: Income is interest on bonds/bond …

January 2019 Comments: Observations on Stock & Bond Markets

Sam Ngooi Comments

Once again, for some time perspective, we are using the chart below from our Special Comments to set out a few price points for the S&P 500 index since Donald Trump’s 2016 election (point and percentage increases calculated from November 9, 2016).  Other charts providing long-term context appear on pages 6-9. Day After Election, November 2016, Base Level: 2,163; Year …

Reflections on John Bogle

Sam Ngooi Comments

John Bogle, retired founder of Vanguard and champion of low cost index funds, passed away on January 16th, 2019 at age 89. Two separate articles in the NY Times Business section (NYT, 1/17/19, page B1 & NYT, 1/16/19, page A23) pay deserved homage to Bogle’s contribution to the world of individual investors. The articles cite his emphasis on keeping investment …