This week, we’re going to spend some time on a topic that doesn’t get as much attention as perhaps it should: the bond market. Then, a quick follow-up to the GameStop debacle we talked about last week and some fun things to know and do about Valentine’s Day.
As we’ve said in our previous weekly updates, when we diversify your portfolios, we include bonds as well as stocks. Stocks and bonds are two of the most traded types of assets, and they both tell stories.
To briefly lay out the difference, a stock market is where investors go to buy and sell equity securities (stocks) sold by a corporation. Stocks represent ownership in a publicly-traded company. When you buy a company’s stock, you become part-owner of that company. A bond market is where investors buy and sell debt securities issued by corporations or governments. When buying a bond, you are lending money for a period of time and charging interest, much like a bank.
A bond is useful in a portfolio because it provides investors with a regular, steady income source. They are often used for short or intermediate-term planning.
One thing we can learn by following the bond market is how optimistic investors are about the economy. With bonds, when prices go down, yields go up. Rising yields signal optimism and the rise we see now indicates that the vaccines and a new stimulus plan could lead to economic growth. Economic growth can lead to inflation, which is generally good for corporations. Treasury Secretary Janet Yellen is confident that the tools are in place to mitigate any inflation that may happen.
Back to the stock market: You might recall last week, we discussed GameStop and how most people who bought in thanks to the Reddit thread were likely to lose money. Well, one savvy investor, a 20-year-old Cornell undergraduate, did quite well. He made just about $30,000 when he sold his shares and then used some of the money to donate Nintendo Switch game consoles and some games to Children’s Minnesota Hospital. So for that student and the children who will enjoy the games, there was a happy outcome.
Speaking of sweet things, Valentine’s Day is next week. The holiday has been around since the 1500s, but the first commercially produced Valentine’s Day cards didn’t come out until 1840. For more fun Valentine’s Day facts, check out this article.
Are you looking to celebrate this 21st century Valentine’s Day in a new way this year? Because candlelit dinners at your favorite restaurants aren’t an option, we found some sources with good ideas for keeping the love alive. Some suggestions we love:
Past performance is no guarantee of future results. Securities offered through Triad Advisors, member FINRA/SIPC. Advisory Services offered through Obsidian Personal Planning Solutions, LLC. Obsidian Personal Planning Solutions, LLC, and Obsidian Personal Planning Solutions, Inc, are not affiliated with Triad Advisors.