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Early in 2022, the Federal Reserve made statements of its intent to raise interest rates due to high inflation. This was not a subtle statement. It was an outright announcement. Rarely do financial advisors get to look into a crystal ball, this was one! By announcing interest rates were going up, the Fed essentially told the world individual bonds and fixed income (bond) mutual funds and ETFS would likely lose money as interest rates were moved up. Subsequently, Almega Wealth Management sold client holdings in fixed income mutual funds in favor of Treasury Bills. This is why Treasury Bills!

This proved to be a smart move. Bond mutual funds and ETFs proceeded to lose money. Many have lost more than 10% of their value year-to-date. Treasury Bills are never sexy and you’re never going to get rich owning them long-term. Versus losing ten-percent or more year-to-date, however, Treasury Bills have helped mitigate losses in 2022.

Most bond mutual funds and ETFs aren’t likely to recover from a 10% loss for several years.

In addition, to using Treasury Bills in client portfolios, Almega is also using them for cash management purposes. Banks across the country are still paying dismal interest rates. Many of the big banks are still paying less than 1% on savings accounts. Almega’s cash management offering easily outshines any bank savings account in terms of yield.

It is almost September 2022, and the Fed is nowhere done raising interest rates. We expect the Fed to raise interest rates at each remaining meeting this year (September, November, and December). Our strategy is to continue to hold short-term Treasury Bills in place of fixed income funds and ETFs. Almega will likely continue this strategy until the yield curve steepens and the Fed concludes raising interest rates.

If you would like to discuss our investment management strategies or have an interest in our cash management offering please schedule a Discovery Meeting.