QE3 New Makes a Strong Case for Fixed Income Sources

QE3 News Makes a Strong Case for Fixed Income Sources

Ben Bernanke, Fed Chairman, says that while savings at a higher rate are important, getting the country heading in the right direction is the goal. And while every economic book I’ve ever studied said that borrowing money at the rate the U.S. is will only lead to higher inflation while those rates stay low.

Realtor associations have already released comments on QE3 saying that while the housing market is seeing an increase in home sales on a fairly consistent basis and home prices are mirroring the sales numbers. They also state that while the consumer may jump at first due to rates staying low, overall sales may take a hit because the consumer now knows the rates will be consistently low for quite some time.

“In August, Gross, who runs the world’s biggest bond fund, cut his holdings of U.S. Treasuries to the lowest since October. He said in a Twitter post on Sept. 12 that more stimulus from the Federal Reserve will lead to a resurgence of inflation.”

Investments, insurance products, and savings vehicles that are directly related to rates being higher and sounder, will definitely continue to be impacted. For my clients, we have talked about fixed products. And what I am discovering is the clients are coming to me asking about guaranteed growth and some asking for information concerning income for life.

You’re taught to stay the course in investing. The only problem is we haven’t seen these economic conditions for a long, long time. Many of my clients aren’t interested, at their age, to chance their retirement funds, especially with QE3 now in the news.

While the rates are tied to U.S. Treasuries, the rates in an investment or savings vehicle will reflect the notion that rates being low, coupled with debt accumulating at this rate, will surely lead to inflationary times.

Although 401k’s have bounced back nicely, as they are supposed to, aging clients don’t have time for recovery again. I say to this group of clients, we shouldn’t chance it, guaranteed growth is guaranteed. Different strategies, once scoffed at, are now being listened to by the general public.