SPECIAL ALERT! BONDS AND BOND MUTUAL FUNDS WILL PROBABLY DECLINE AND STOCKS RISE

Posted on December 20, 2010 by The Weekly Commentary

Interest rates will probably trend UP in the foreseeable future. This means the value of most bonds and bond mutual funds will trend DOWN. The new tax law signed Friday by President Obama substantially increases the probability that the economy will expand faster that previously contemplated. We predict that as the economy improves, interest rates will rise.

We recommend:

Savers should avoid purchasing long-term fixed rate CD’s – keep the maturity to no more than 1 year.

Borrowers should either convert variable-rate loans into fixed rate loans or set up a side account with sufficient funds to pay off variable-rate debt.

Investors should switch intermediate and long-term maturity bonds into money market funds, equities (stocks), equity mutual funds, market linked CD’s, and certain types of bonds that do well when interest rates rise.

Valley National Financial Advisors, and its family of companies, has been in the Lehigh Valley since 1985. The company is independent and locally owned. As a respected and trusted organization, our relationships with many clients and their families transcend generations. We have the expertise to provide clients with financial strategies to effectively manage their existing assets and to provide for the eventual transfer of their wealth.

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