Hi there!
As we always say, we are here for you. Please reach out ANYTIME! A few things for this month:
- CDs and Cash: Many of our clients don’t know that we offer FDIC insured CDs – let us know if you want to learn about options for parking cash!
- ARE WE AT THE BOTTOM: Historically, we could be getting near….September is often viewed as the worst month, the non-presidential election cycle year is typically the worst year in the cycle, and after an average intra year decline of 19% in a midterm election year (currently markets are further down than that), the following 12 months is up 32% (according to our research – see attached). Sometimes, history can serve as a calming force (i.e. we’ve been here before), but no one knows, not even the ones who sound the smartest. You are rewarded in markets for dealing with uncertainty, fear, and volatility. Sometimes that reward just takes time to be paid. 😊
- WHAT IS GOING ON: Government stimulus, subsequent inflation, shrinking earnings, markets get nervous/fall….NEXT: Real estate price reduction, unemployment numbers rise, fear index hits a peak, country/world has a “catalyst”, market finds a bottom during pure despair, market starts to go up….then it repeats. This is the narrative that we believe will play out. Valuations are starting to get attractive in certain areas, we buy profitable businesses that stand the test of time, we diversify, re-balance, and run a very rigorous time-tested process.
Read here for more from our research partners: In the Markets Now WPR 2022 Midterm Correction
Sincerely,
Adam and Michael
Certificates of Deposit (CDs) that typically are issued by a bank directly to a customer carry a fixed interest rate over a fixed duration of time and are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 against insolvency by the depository institution. As such, they are generally considered by the investing public to be simple, conservative products that carry few risks. Brokered CDs are CDs issued by banks via a "master CD" to deposit brokers, which in turn sell interests in the master certificate to individual retail investors. Any broker/dealer that sells brokered CDs is a deposit broker.
Unlike bank issued CDs, brokered CDs can trade on a secondary market, may have a longer holding period until maturity, be more complex and carry more risk than “traditional” CDs. The secondary market for brokered CDs may be limited and Baird may not make a market in the CD. If a Brokered CD is sold prior to the maturity date, the pre-maturity sales price of the brokered CD may be less than its original purchase price. This will be particularly true if interest rates have risen since the time of the original sale. Buyers will not generally be interested in buying a lower interest rate CD in the secondary market if they can purchase a higher rate CD in the primary market.
Brokered CDs may include a provision that allows the issuing bank or other depository institution to "call" or redeem the CD prior to maturity at a given price. Call features typically are exercised when a brokered CD is trading at a premium to its call price in the secondary market. The call option is solely at the discretion of the issuer. If this happens, investors seeking to reinvest their redeemed funds will be subject to reinvestment risk because interest rates may have fallen since the time they first purchased the brokered CD.
Brokered CDs may also have "step-up" or "step-down" features. A "step-down" CD will pay an above-market interest rate for a defined period of time but will then "step-down" to a lower, predetermined rate that will be paid until maturity. Similarly, a "step-up" CD will generally pay a below market interest rate for a defined period of time and will "step-up" to a higher, predetermined rate that will be paid until maturity. Customers should verify that a "step rate" on a brokered CD they are considering may be below or above then-prevailing market rates and that the CDs are also subject to secondary market risk and often will include a call provision by the issuing depository institution that would likewise subject them to reinvestment risk.
*Past performance is not a guarantee of future results and diversification and re-balancing do not ensure a profit or protect against loss.