4TH QUARTER FIXED INCOME

Fixed Income Market: The bond market had been relatively stable in the first half of the year, but bond prices took a strong hit as investors accepted the reality of rising interest rates and potentially steeper inflation.    The yield on the 10-year Treasury was 3.05% at the end of September – versus 2.41% at the beginning of the year.     (Yields move inversely to prices.)  But bond prices gained again in the fourth quarter as the stock market suffered and the yield was 2.68% at year’s end. 

Other Investments: Our repeated aversion to bonds with long maturities remains firm. We still believe the risk of a sharp decline in prices is too great a risk for our clients. We prefer to find alternative investments such as real estate limited partnerships, demand notes, and municipal tax liens.