Hello, my name is Chad Taylor, managing partner with MDT Financial Advisors here in Houston, Texas. Today is Wednesday, December the sixth, and we're coming up on the holiday season. So I hope you get to relax a little bit, spend time with friends and family. I know my family, Jennifer and I are going to Cincinnati to see Madison dance with the Cincinnati Ballet and the Nutcracker, so we're real excited to get to see her perform. So I hope you're getting to do something that you enjoy as well. Today I wanted to hop on and talk about another chart. It seems like I've been doing that a little bit more lately. And this was another chart from the Wells Fargo Investment Institute that kind of talked about bonds or fixed income. You'll hear me say both and they're kind of interchangeable. We're talking about the part of your portfolio that's the bond or fixed income section versus the stock market portion of it.

And historically speaking, bonds have always been used as a good diversifier from the stock market. If the stock markets were down, a lot of times bonds were up last year. That didn't play out that way. You had the bond market down just as a stock market was down and really pretty sizable and rough compared to past times, at least in my career since the nineties. So it was a rough year to own bonds. And you start to question, should you own bonds? Why do you own bonds? If they didn't help last year, will they help? Usually bonds give you a little more stability and that's why most people want to have them in your portfolio and be diversified into bonds. And the Fed has been raising interest rates now almost two years. If you remember that discussion. They're trying to fight inflation and trying to bring inflation down. So they've been raising interest rates. So yields have been going up. If you've noticed, CDs are higher than they've been in quite a long time. And so when that happens, the bond prices fail or have fallen this year. They were positive early in the year, then negative again midway through the year. And here the last couple of months have been rising again. And so we'll see what happens. But this chart that I'm going to show you here, let me go ahead and share it.

You can see that why we favor long-term high quality bonds for 2024. And as with all these reports that I always mention in these videos, if you'd like a copy of it, just let me know. And what it's showing there is that you see there's three different columns, six months, 12 months, 18 months. What happens to bonds six months after the Fed stops tightening or stops raising interest rates? Now has that happened yet? No one knows for sure. There's talk that they could raise them. Again, there's talk that they're done raising them. They don't just come out and telegraph what they're going to do, but you've got to think we're closer to the end than not at this point. So maybe they've stopped it raising interest rates. Maybe they're going to raise them again once more, twice more. Who knows for sure, but at some point it will stop. And when that happens, you can see, let's just look to the left there. The left column, it says six plus months. And the orange bar, that's long-term bonds versus the blue when that's intermediate bonds. And you can see once the fed, and this is since 1980, once the Fed stopped raising rates six months out, long-term bonds were up roughly 10%. Intermediate bonds were up 6%. You can see 12 months and then 18 months

In most balanced portfolios or most diversified portfolios. We've kind of got a combination of all of these short-term intermediate. And in here in this, it just shows what has happened with bonds once interest rates stopped going up. Will that happen this time? As I said, no one knows for sure, but those are some of the reasons why we want to own bonds in portfolios. And so if you'd like a copy of this, just like I mentioned, let me know and if you'd like to discuss this, how it pertains to your portfolio, let's talk about that as well. It's always good to revisit these things. The new year always starts a great time to have these discussions and make sure that your asset allocation is good for you right now. And so let's have those conversations. Please don't hesitate to reach out. I hope you have a great holiday season and we look forward to talking more in the new year. Have a great day.

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