Maybe the only thing everyone can agree on after the last two and a half years is that we would all love it if things could just get back to normal. Unfortunately, the only thing that has heeded that call to go back in time is the financial markets.
As we sit through three quarters of the year, most stock indices are just above the levels they were as we rang in the new decade of the 2020’s (which gets a zero star review so far). On top of that, quickly rising interest rates have pushed short term yields up over 4%.
If you look at that action in the context of this year, it has meant a lot of market volatility; and mostly just the downward kind of volatility. But, if we look at the big picture since the pandemic began, there are some good things that we’re getting back to.
The most important of those is normal interest rates. With higher rates, decent yields have returned. It has been a very long time since anyone has been able to buy a 2-year treasury note yielding above 4% or a CD (yes I said CD) above 2% yet here they are. With decent yields accessible, investors won’t be forced to tie up money for extended periods or take uncomfortable risks just to get a reasonable rate of return.
Rates going up this quickly has caused a lot of heartache this year, but if they can be maintained, they are a good foundation for much more normal days ahead in financial markets.
Certificates of deposits (CDs) typically offer a fixed rate of return if held to maturity, are generally insured by the FDIC or another government agency, and may impose a penalty for early withdrawal.