The Fed announced a 50 basis point cut yesterday in the central bank interest rate which means the good days of high yield savings and bond rates may be coming to an end but it’s not all bad news.
Bonds
As bond yields go down, bond prices go up which means that most of my bonds in my portfolio are up nicely anywhere from 7% to 16% depending on the time frame. I expect the bonds to continue to go up in value as the Fed continues cutting so what I need to do now is figure out if I want to keep the bonds over the long term or cash them out and take the profits.
These types of situations are the entire point of having a stock and bond portfolio so that losses in one end up as gains in another and vice versa. The obvious rotation will be to take the profits in bonds and allocate some of the money into discounted / deep value stocks then rotate again at some point into the future.
Dividend Stocks
With bond yields sliding back down, many investors are rotating into dividend stocks or dividend ETFs like SCHD which is something else that I’ve been doing on a smaller scale myself.
Of course, I consider myself a value investor focused on free cash flow which I have written about here.
What’s Next?
The fed wouldn’t have cut 50 basis points if it didn’t think the economy was slowing so the best thing to do now is just be vigilant with your investment portfolio and position accordingly as things change.
Share The Wealth
How are you reacting to the Fed’s 50 basis point cut? Let me know in the comments below.