Conservative investors trying to save by putting their money in government bonds are not going much better. Yields on the benchmark 10-year US Treasury move about 0.65% – not far from record lows.
The lack of a new round of stimulus from Congress is another reason why the Fed should stand pat.
The central bank may need to introduce more lending programs for trouble with consumers and businesses if Democrats and Republicans on Capitol Hill are soon unable to reach an agreement with President Trump on another package of financial aid.
Thus, consumers who have the ability to continue investing in stocks – which have increased back to extreme heights – may need them for their retirement.
Mutual fund giant Fidelity recently reported that the average IRA balance and average 401 (k) balance for its clients each increased about 15% from the first quarter due to the comeback of the market.
Equities may be a better option for investors looking for income as well. The average dividend yield for the S&P 500 is 2.1%, significantly higher than yields for Treasury bonds and bank savings rates.
But that does not mean that investors should ignore both (or even cash) bonds.
“We need to see through the noise and focus on maintaining well-balanced investments over the long term. This is even more important when interest rates around the world are so low,” said Rupert Rucker, head of revenue solutions for Schroders, in a report earlier this month.
If Tim Cook and Warren Buffett kept their powder dry, you might want to consider this as well – – despite the fact that it does not generate much in the way of interest income.
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