After a nearly 700 point drop Tuesday, the Dow Jones Industrial Average ended in negative territory for 2023 at the close.
YTD Returns - As of 12:30 PM Wednesday, February 22
DJIA + 0.22%
S&P 500 + 4.24%
NASDAQ + 10.13%
(Numbers from Bloomberg)
One fund of recent interest here, ARKK, was ahead by more than 34% YTD going into today’s session. It fell back by more than 6% today. The fact that any fund could move like this one has over the past year might indicate how crazy the investing landscape has gotten. (Numbers from Bloomberg)
Just me or do geo-politics seem increasingly related to the market problems? Russia / Ukraine for sure. But now, just as China’s economy is emerging from its covid-related pullback, it appears relations with the U.S. are deteriorating. The balloon of course. But a lot more going on from my readings, including what appears to be China becoming more supportive of Russia’s invasion of Ukraine. If that’s not enough, North Korea fired off a barrage of its new solid fueled ICBMs over the weekend - one landing in the Pacific within sight of Japan. The solids are superior to liquid fueled rockets in that they’re easier to hide and can be launched without any prep on very short notice.
And you want to invest?

Bought mama GM bond... Many mutual funds etf have this bond. No recent bankruptcy... Only red flag - Was bailed out 2009. Good hedgie
CUSIP 37045xdd5
5.5% ytm
0.88
https://www.google.com/search?q=37045xdd5&client=ms-android-samsung-gs-rev1&sxsrf=AJOqlzW8t7qk7pVxLgfcm6xbI38MuOF7pA:1677013301945&ei=NTH1Y8GhOdG5qtsPpdC-wAk&oq=37045xdd5&gs_lcp=ChNtb2JpbGUtZ3dzLXdpei1zZXJwEAMyBAgjECcyBwgAEB4QogQyBQgAEKIEMgcIABAeEKIEMgcIABAeEKIEMgcIABAeEKIEOgcIIxCwAxAnOgoIABAeEKIEELADOggIABCiBBCwAzoFCCEQoAE6BQghEKsCSgQIQRgBUIUSWJAhYJwnaABwAHgAgAHFAYgBvA6SAQQwLjEzmAEAoAEByAEEwAEB&sclient=mobile-gws-wiz-serp

No winners except shorts
Did not buy spy puts today
Prob need to price in Uncle P 0.5% expect increased rate this month and market get ready for recession/poor WMT performance
Not sure if market and inflation remain sticky. We had a nice run up ast 6 7 wks so expect 7- 10% retracement but hopeful for smaller legs downturns (not reach spy 348.9 levels)

@MikeM,

2- It's not a given high quality bonds will move opposite equities as we saw last year. I might argue stocks and bonds may stay correlated through this year too. That again makes locked in rates of 5%'ish a nice safe balance to falling equities.

Just as the bulk of rate hike is behind us, there may be few more 25 bps hikes coming in March and May. Today both stocks and bonds are falling simultaneously and their asset correlation approach 1.0 similar to that of last year. Thus, bonds offer little protection to stocks in today’s environment.
Today, JUNK fell 2X that of BND and they truly track more of stocks than bonds. Likewise, I bought 6 and 12 mo T bills today as older ones matured. Who say cash is trash?

@LewisBraham
Thanks for tip on Green Century. Quick look shows they have about matched SP500 while avoiding fossil fuel etc. As 2% is ABBV and MRK 1.5% they are not too focused on inflated drug costs as a social issue.
Their fees are rather high. Do you know how much of their "profit" they have sent to the Public Interest Research Groups? Another idea would be to find a similar cheaper fund and donate the fee difference to pubic interest groups or environmental organizations.

The US does not have capitalism. What we live under is a "corporate socialistic welfare" where huge corporations get federal and state benefits of all kinds ( tax breaks, regulatory pass throughs, sweetheart laws etc) as long as they pay off the politicians with campaign contributions, do nothing lobbying jobs and secret stock deals. Federal bailouts are available if company policies prove incorrect and the company is failing.
As a prime example I give you ABBV who has played the patent system to control Humira for decades, making billions.
The only goals of most CEOs is to increase their salaries and perks and stay in the job as long as they can. The average CEO compensation has increased 1322% since 1978 and they make 350 times the average worker.
True capitalism would have forced Merrill Lynch, Citi etc to go bankrupt in 2008, and sent their CEOs to jail for fraud, and many companies would have shut their doors forever in the pandemic.
@baseballfan
A Democratic socialist system would have the State control these excesses, partly though ownership of essential industries and partly though effective regulation. We have none of that.
Can't wait to see how "free enterprise" handles the PFAS contamination of drinking water throughout the US. Anybody think 3M will go bankrupt and it's CEOs all go to jail?

Thanks @MikeM. Your take is much appreciated. Generally I’ve tried to add a bit when (10-year) rates approach 4% and sell a bit at under 3.5%. Explains the choice of an etf over a good mutual fund. That said - you may well be right … we dinosaurs are very slow in changing direction. :)
PS - I’m old enough to remember when money market funds yielded 15-20%.

Hi @hank. I guess I have an opposite view of this:

Still, I’d rather be in intermediate duration AAA fixed income than cash because (1) I don’t believe these high rates can persist and (2) high quality bonds should provide better protection in the event of a stock crash.

1- These high rates may not persist, but why not grab them while you can? I just picked up a 9 mo and a 12 mo treasury at ~5.1% today. So in that case that rate is locked in for at least those time frames. You'll make a little less moving out in duration but still can get 4.7 or 4.8 for a couple years anyway.
2- It's not a given high quality bonds will move opposite equities as we saw last year. I might argue stocks and bonds may stay correlated through this year too. That again makes locked in rates of 5%'ish a nice safe balance to falling equities.
Different view. No right or wrong.

At least on Schwab, Treasuries pay more than a CD up to 18 mos and they are easily liquidated without a penalty and are state tax exempt.
Two and three years CDs are 0.25 and 0.4 % ahead, but who knows what interest rates will be then.
I had a CD got bust in 1984 or 5. While I got my money back it took many months.

https://www.sec.gov/Archives/edgar/data/1707560/000162363223000304/fhidefisr6prsaisup455909edg.htm
497 1 fhidefisr6prsaisup455909edg.htm
Federated Hermes International Developed Equity Fund
A Portfolio of Federated Hermes Adviser Series
INSTITUTIONAL SHARES (TICKER HIEIX)
CLASS R6 SHARES (TICKER HIERX)
SUPPLEMENT TO SUMMARY PROSPECTUS, PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 31, 2023
On February 16, 2023, the Board of Trustees (the “Board”) of Federated Hermes Adviser Series approved a Plan of Liquidation for Federated Hermes International Developed Equity Fund (the “Fund”) pursuant to which the Fund will be liquidated on or about April 21, 2023 (the “Liquidation” or the “Liquidation Date”).
In approving the Liquidation, the Board determined that the liquidation of the Fund is in the best interests of the Fund and its shareholders. Accordingly, the Fund’s investment adviser will begin positioning the Fund for liquidation, which may cause the Fund to deviate from its stated investment objectives and strategies, including, but not limited to, the Fund’s policy to invest at least 80% of net assets (plus any borrowings for investment purposes) in equity securities of developed markets. It is anticipated that the Fund’s portfolio will be converted into cash on or prior to the Liquidation Date.
Effective on or about March 31, 2023, the Fund will be closed to new investors and closed to additional investments by existing shareholders. Any shares outstanding at the close of business on the Liquidation Date will be automatically redeemed. Such redemptions shall follow the procedures set forth in the Fund’s Plan of Liquidation.
Dividends and capital gains, if any, will be distributed to shareholders prior to the Liquidation.
At any time prior to the Liquidation Date, the shareholders of the Fund may redeem their shares of the Fund pursuant to the procedures set forth in the Fund’s Prospectus. Shareholders of the Fund’s Institutional Shares and Class R6 Shares may exchange shares of the Fund for shares of any Federated Hermes fund or share class that does not have a stated sales charge or contingent deferred sales charge, except shares of Federated Hermes Institutional Money Market Management, Federated Hermes Institutional Tax-Free Cash Trust, Federated Hermes Institutional Prime Obligations Fund, Federated Hermes Institutional Prime Value Obligations Fund, and no-load Class A Shares and Class R Shares of any Fund if the shareholder meets the eligibility criteria and investment minimum for the Federated Hermes fund for which the shareholder is exchanging.
The Liquidation of the Fund will be a recognition event for tax purposes. In addition, any income or capital gains distributed to shareholders prior to the Liquidation Date or as part of the liquidation proceeds may also be subject to taxation. All investors should consult with their tax advisor regarding the tax consequences of this Liquidation.
February 21, 2023
 
Federated Hermes International Developed Equity Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Q455909 (2/23)
© 2023 Federated Hermes, Inc.

update:
https://www.sec.gov/Archives/edgar/data/1355064/000158064223000951/day-hagen_497.htm

@Sven, don't you mean apples and oranges comparison? It matters little that your bond fund is yielding 5% if your total return, even with that yield summed in, is down -10% in a year.

Even at current favorable rates, a minimum-allowable deposit gets you nowhere, really, for only one year's time. You really must commit a lot more than $1,000.00 for that 5% rate to make a real difference for you. 5% is pretty damn good, though. My bond funds offer a higher yield already. Given my current positioning, I can add to HYDB or SCHP, the latter being rather much safer. Meanwhile, back at the ranch, my T-IRA bond funds are doing their job for me, too. (I like the commercial. Cute.)

Large brokerages such as Fidelity offers one-yr non-callable brokered CDs yielding 4.85%. ... Bank CDs are not competitive for my $
Depends on the month and the bank.
Capital One - 5.00% 11 mo online CD
Ally Bank - 5.00% 18 mo online CD
BMO Harris Bank - 5.00% 12 mo online CD (rate depends on zip code)
Perhaps "you should have a Harris Banker" (pre BMO acquisition)

Didn’t mean to suggest anyone was talking their book ... :)
I’ve cited Blackrock’s global fixed income head Rick Rieder on a few past occasions who sounds ecstatic about opportunities in fixed income. I haven’t a clue - except to say that 3.85% on the 10-year certainly looks more appealing than 0.50% did little over a year ago. Yes, it was a very good interview with Gibson Smith. Certainly sounds knowledgeable.

Think you can do better. Large brokerages such as Fidelity offers one-yr non-callable brokered CDs yielding 4.85%. Just avoid callable CDs from JP Morgan. Bank CDs are not competitive for my $.

Lots of MBS in those. Pimco and DoubleLine noted them several weeks back as high yielding investments with a margin of safety, given how oversold they thought those securities were. The port yield and credit quality of Pimco Income looks to be benefitting, close to 6% depending on share class, for a low-ish IG fund overall (A- per M* metrics).
I've never owned any of those securities directly, so not sure about safety vs. Treasuries. I'd guess pretty safe outside a major disaster like 2008, but not up to what you get with T's.
Edit: Fidelity is showing a new-issue Fed Home Loan Bank 1y offering at 5.47%, not call protected.

Can anyone explain what a "Government Agencies" bond is. I haven't paid attention to them on Schwab's site because treasuries have been the sweet spot, but now I see a 1 year GA at 5.37%. Does this have the same safety as a treasury?

This weeks one can build a nice 3 mo, 6 mo and 12 month T bill ladder with yield ranging from 4.85 - 5.0%. Since today is a holiday, Fidelity still have the auction open.
Also don’t forget to check out the CDs too.

@Sven: "This week we are buying T bills instead as they yield close to 5%."
Ditto. With earlier bills rolling off over the next few months, the higher yields on bills here will give a nice boost to portfolio yield.