Content provided by Marc Pfeffer, CLS Senior Portfolio Manager
March is one of my favorite months of the year. The days are getting longer, the NASCAR season is gearing up, baseball’s spring training is underway, and, of course, basketball is readying to take over our televisions for one “mad” month.
This year, the markets are making March even more exciting. We have hit new highs in all three indices of the U.S. stock market, and the Federal Reserve (Fed) has finally convinced us it is serious about raising short-term interest rates. Personally, I think that is a good thing. Why? It means the economy is on very solid footing. Also, as a saver, I am happy to start getting some income in my savings accounts and other short-term investments that I have sitting around (waiting to pay for those dreaded college bills).
And I’m not the only one excited to see rates rise. I was born in the last year of the so-called “baby boomer” generation, which is considered those born during the post-World War II baby boom that started in 1946 and ended in 1964. 76 million U.S. children were born during this time span. By some accounts, baby boomers control more than 80% of personal financial assets and account for more than 50% of all consumer spending. As baby boomers start to retire, it is anticipated they will become more conservative as they enter the next stage of life. The house will be paid off and possibly sold, the amount of travel will increase, and helping out the kids and grandkids financially will somewhat slow. These retirees will depend on cash and short-term investments to sustain their lifestyles, and these assets have returned virtually nothing since 2008.
On behalf of my baby boomer generation, I can say I will be happy to see rates moving up as that part of my personal balance sheet starts to earn some money. Here’s to continued economic growth, and kudos to the Fed for seeing the signs that we can finally take interest rates higher.