March, 2021

Rising Rates Derail Stocks

The 10-year Treasury yield climbed last week, from 1.34% to 1.42%, sending shudders through the stock market. While investors generally understand that economic strength may lead to higher bond yields, it was the speed at which bond yields rose that proved unsettling. Generally, when yields rise, bond prices tend to fall.1

Rising yields also drove sector rotation, with economic reopening stocks (e.g., energy, financials, and industrials) outperforming stay-at-home stocks, especially many of the big technology names.

The trend of higher yields was mitigated by testimony on Tuesday and Wednesday by Fed Chair Jerome Powell. He provided some assurances that the Fed remained committed to its current easy money policy stance.2

A surge in yields on Thursday, however, sparked a new wave of anxiety and a broad retreat that left market averages lower for the week.

Powell Testimony Calms Investors

Concerns over rising long-term bond yields and inflationary pressures were eased by two days of testimony by Fed Chair Powell. Powell reiterated the Fed’s intention to stick with its near-zero short-term interest rate policy and monthly bond purchase program until the labor market fully recovers and its inflation goals are met.

Powell dismissed market fears of accelerating inflation, noting that he did not see inflation reaching any troubling levels, declaring that any increase would be modest and transitory. He added that the Fed would likely allow inflation to spend some time above its 2% target rate. Inflation for the past eight years straight has been below that target.2

Rising Rates, Stimulus, & Bonds Prices

We're sure you’ve heard that the House recently handed the Senate another round of stimulus to try and counteract the economic effects of the COVID-19 pandemic. The new stimulus package could narrow income eligibility to receive a stimulus check, while expanding other types of eligibility and broadening unemployment benefits.4,5

Many are left wondering how the additional stimulus package will affect the economy and the financial markets down the line. The volatility seen in 2020 has continued into 2021, while some sectors experienced a boom as the Federal Reserve guided short-term interest rates at-or-near zero.

But remember, long-term rates have been trending higher for the past seven months. Traditional 30-year-mortgage rates increased to 3.23%, which is the largest single-week increase in a year. Because mortgage rates are tied to 10-year Treasury rates, an increase may indicate that the specter of inflation is looming.6

How will this affect your investments?

One time-tested principle of investing is, "when bond yields move higher, bond prices tend to move lower." Investors are doing a "double take" on the 10-year Treasury yield, which recently topped 1.5% — its highest level in about a year. With the increase in yield comes a drop in price.7

It's been a while since we've been in a rising rate environment. For some, the first time they'll notice a change in bond prices is when they open their monthly statement and review the investments.

However, before you check your February statement, here is some background that may help put the most recent move in long-term rates in perspective.

The interest rate on the 10-year Treasury dropped steadily in the first half of 2020 and bottomed at 0.54% in late July. While rates remain at low levels, the yield on the 10-Year Treasury has nearly tripled in the past seven months. That's a significant increase in a relatively short period.8

Bond yields may increase for several reasons—some of them good (strong economic growth) and some of them concerning (accelerating inflation). Bond investors are anticipating a pick-up in economic growth and appear concerned about inflation due to the Fed's easy monetary stance and federal fiscal spending in response to the pandemic.

The question is, at what point do stock investors begin to worry about higher bond yields. That answer may be if 10-year Treasury yields start to rival the dividend yield on the S&P 500.9 

Remember, the Federal Reserve has reiterated its support for its zero-interest-rate policy, but much of the Fed's influence is on short-term interest rates. Market forces play a larger role in determining long-term rates like the 10-year Treasury.10

Bonds can play an important part in any portfolio, but like any investment, periods of volatility are expected. If you're concerned about the outlook for bonds or the macro-economic trends behind the bond market's rally, please give us a call. We'd welcome the chance to hear your perspective, and hopefully, we can provide some guidance.


Avoiding Cognitive Decline

Of those aged 65 and older, 15 to 20 percent have mild cognitive impairment. People living with mild cognitive impairment are more likely to develop Alzheimers, and almost two-thirds of people currently living with Alzheimers are women.11

There are three basic forms of cognitive decline associated with aging:12

  • Age-related changes in memory, which are a natural consequence of aging.
  • Mild Cognitive Impairment, which involves mild memory loss such as forgetting important events or appointments, or an inability or difficulty with finding the right word in a conversation.
  • Dementia, which includes Alzheimer’s disease, is a chronic, progressive, irreversible and comprehensive cognitive impairment that may affect daily functioning.

There are a range of risk factors that can lead to cognitive decline, including:13

  • Increased age
  • Genetic predisposition
  • Smoking
  • Excessive use of alcohol
  • Physical and mental inactivity
  • Chronic stress
  • Medical conditions, such as diabetes, depression, high blood pressure, and high cholesterol
  • Low social involvement

Strategies to Help Manage Cognitive Decline

Intellectual Stimulation

Reading, learning a musical instrument, and playing cards or board games are all activities that stimulate the brain and may reduce cognitive decline.


Staying physically active can improve your mood, reduce stress, and help eliminate some of the medical conditions that are risk factors.

Low-Fat Diet

A nutritious diet, low in fat, may help reduce contributory risks such as high blood pressure, diabetes, and high cholesterol.13

A Sound Night’s Sleep

It’s normal for sleeping difficulties to emerge with age, but insufficient sleep can impair memory and learning. Going to bed and waking up at the same time can help. However, if you have a sleep disorder, consider seeking qualified assistance.

Stay Social

Staying engaged with friends and family stimulates the brain. If you live alone or have limited social ties, look to build up contact with neighbors and social groups.

Talk to Your Doctor

It’s best not to self-diagnose or treat yourself if you think you are suffering from cognitive impairment. Visit your doctor to explain your symptoms and let him or her assess your condition and recommend the necessary treatment and counseling.

4 Facts About Capital Gains

When you sell a capital asset like an investment or a piece of property, the sale can result in a capital gain or loss. The IRS defines a capital asset as “most property you own for personal use or own as an investment.” Here are four facts you should keep in mind:

  1. A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell an asset.

  2. You must include all capital gains in your income and you may be subject to the Net Investment Income Tax if your income is above certain amounts. Consult a qualified tax expert for help.

  3. The IRS allows you to deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.

  4. If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov3

BAM & Shake It Off!

‘Shake It Off is more than a Taylor Swift song. (Over 3 billion views on YouTube!) It's more than a quip directed at a mildly injured athlete during a Little League game. (There's no crying in baseball, as Tom Hanks taught us).

The capacity to let a misdeed, comment, or situation go and move on is a mindset and a choice.   

I recently heard it discussed when Dave Anderson opened his new barbecue restaurantthe business cards were printed incorrectly.  The business name was supposed to be Dave’s Famous BBQ Shack.  His wife suggested he let it go and let the misprint stand.  He took her advice, and now the restaurant known as Famous Dave’s operates internationally. We all know that changing the restaurant's name didn’t change the famous BBQ sauce recipe, and Dave’s Famous BBQ Shack could have been an enormous success.  However, if we’re honest, Famous Dave’s seems to roll off the tongue with a bit more ease.  What might have been made into big deal turned out to be a blessing in disguise for Dave.  He took his wife’s advice and shook off the misprint leaving him with a very recognizable and, yes, famous restaurant name.  

What about you?  Can you easily shrug things off, or do you harbor situations you know you shouldn’t 

Having the capacity to let things go, not take offense, and move on can make one feel less stressed and more at peace. One of the greatest gifts you can give yourself is to forgive someone else’s misdeed. Each of us likely has interactions that ‘get our goat’ more than others, and the good news is we all have it within ourselves to choose our response. Choose wisely!  Finding a couple of methods to help us gather ourselves before replying is a beneficial exercise. In her article called “How to Move on Quickly When Something Upsets You,” life coach, Linda Luke, offers a quick and easy method for moving past an upsetting situation.  

It goes like this -  

  1. Stay aware of moments when you get stuck being upset, frustrated, or disappointed. 
  2. When it happens, quickly decide if it is worth staying in that feeling. 
  3. If not, BAM it! 
  4. Turn your thoughts to something else. 

 What is BAM? 

BAM is short for Bless it And Move on!  This sentiment doesn’t necessarily mean literally leaving the situationInsteadit is a mental process of permitting yourself to let it go and leave it in God’s hands, as Linda mentions in her article. This process allows you to invest your precious energy in things that matter more to you.  

I submit to you that just about all situations are BAM-able - 

  • If someone cuts you off on the road – Bless it (them) and move on!! BAM! 
  • When you find yourself in a disagreement – BAM! 
  • If you can’t stop the negative thoughts spinning in your head – BAM! 


You get the idea!  Should you find yourself feeling irritated or upset, give this de-escalation method a try – Bless it, move on, and make a positive choice to shake it off!  

The 5 Second Rule

Has this ever happened to you? You think to yourself, "I should do ______" and after some not so helpful inner monologue you convince yourself not to do "it"? Odds are, if you don't immediately take action on the thing you were thinking of, like go for a walk or call a friend, you'll end up talking yourself out of it.

This article from Mel Robbins describes what she calls the "5 Second Rule" which simply stated is - if you have an instinct to act on a goal, you must physically move toward the goal within 5 seconds or your brain will move on.

Let us know if you find yourself in this situation and if the "5 Second Rule" helps you.

Click Here - The Five Elements of the 5 Second Rule | Mel Robbins

Footnotes and Sources

1. U.S. Department of the Treasury, February 26, 2021
2. The Wall Street Journal, February 24, 2021
3., October 14, 2020
4., March 3, 2021
5., March 3, 2021
6., March 3, 2021
7. U.S. Department of Treasury, February 26, 2021
8., February 26, 2021
9., February 26, 2021
10. The Wall Street Journal, February 24, 2021
11. Alzheimer's Association, 2020
12., 2019
13., 2020

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