Looking for safety?

Is this a track from the 1980s? Current inflation rates are certainly taking a page out of the 1980s playbook. The Bureau of Labor Statistics estimates that inflation was at 6.9% in 2021. Inflation is back but not for the same reasons as the 1980s. A combination of easy money policy, government spending, supply chain issues, energy economics, as well as post covid spending are all contributing factors.

The shock of inflation has forced the Fed to make some aggressive monetary policy moves. The Fed has announced another .50% increase in the Fed Funds rate set for May 2022.

So how are low risk investments faring in the current environment? Bonds have suffered one of the worst quarters on record. This is the normal teeter totter effect we see when rates go up: bond values fall, yields increase.

Below is a reference for current cash, cash equivalents, and investment grade (high quality) bonds. With inflation picking up it is important to optimize your short term and “safety net” investment holdings. Talk to us about how to make changes in your portfolio.

Money Markets

Brokerage Sweep Cash 0.01%
Schwab Prime Money Market .10%-.25%
Schwab Municipal Money Market 13%-.32%
Schwab Variable Money Market   .25%

Certificate of Deposit (CD) Median Yield

6 month 0.75%
1 year 1.40%
2 year 2.55%

Treasury (Fed tax free)

1 year 2.09%
3 year 2.89%
5 year 2.95%
10 year 2.90%

Corporate AAA

1 year 1.91%
3 year 2.93%
5 year 3.30%

Municipal AAA (tax advantaged)

1 year 1.50%
3 year 2.36%
5 year 2.56%
10 year 2.86%