Ichetucknee Springs State Park in north-central Florida is about as far from civilization as you can get in my home state. No strip malls on every corner. No massive theme park lines. No tourists by the thousands. Heck, you can’t even get a decent cell phone or data signal — a real anomaly in this day and age.
In short, it’s paradise … especially for a dad looking to enjoy some bonding time with his kids. So this past weekend, I brought my daughters there for a tubing trip in the river’s cool, clear waters — just like my father brought me there as a kid years ago.
I know I had a great time, and I think they did too. One of the biggest lessons I hoped to teach them is that it’s OK to let go of our daily crutches — to leave behind the iPods, Kindles and everything else, and just enjoy the splendor of nature (though I did bring along my phone and waterless case to capture some memories, as you can see!).
It’s a lesson investors are going to have to take to heart soon, too. I say that because central bankers are starting the long process of cutting off the monetary morphine. Nine long years since the last interest-rate hike, several Federal Reserve policymakers have made clear that they’re getting ready to finally pull the trigger again. Chairman Janet Yellen only added to that belief after the Fed’s meeting on Wednesday, saying that the Fed is still leaning toward hiking rates despite some concerns about the dollar and weak exports.
As this Bloomberg story notes, foreign central banks are also starting the weaning process. The European Central Bank didn’t freak out when bond prices started tanking and yields started jumping recently. It basically told market participants, “Deal with it!”
Will it be a smooth exit process? I sure don’t think so. Just consider: The last time the Fed actually raised interest rates was June 2006. Someone who graduated from college that year and took a job on Wall Street is now roughly 31 years old – and has never seen a rate hike in his or her professional life. There’s no telling how those relative newbies will handle it.
We’re already seeing volatility rise — in the case of European stocks, to its highest level in three years just this week. We’re already seeing huge swings in everything from currencies to interest rates. Heck, investors in long-term U.S. Treasury bonds have lost more than 14% of their money on government securities their brokers probably told them were “safe.”
That volatility is only going to get more intense as the morphine doses are dialed back further. It does NOT mean you have to sell everything. Far from it. It DOES mean you will likely need more accurate, thought-provoking, and actionable guidance than you have over the past few years.
And I’m not talking about guidance from brokers or analysts who have never even experienced a Fed rate hike. I’m talking about help from advisers who, between them, have seen several interest rate cycles over multiple decades.
I plan to do my dead level best to deliver that to you, and I trust it will help you navigate the coming turbulent waters in this market. Because just like my daughters learned to live without their gadgets and gizmos for a while, Wall Street investors are soon going to see what it’s like to live without a constant flood of easy money pushing them along.
Until next time,
The investment strategy and opinions expressed in this article are those of the author’s and do not necessarily reflect those of any other editor at Weiss Research or the company as a whole.