The SD-PFS*Ticker
Vol 10, Issue 2
June 2019

Rainy Days and Mondays 
If you're like us, you waited all winter for the warm, sunny days of summer, only to be greeted by what seems like an endless string of gray and rainy days.

While thinking about saving for a rainy day, we hope you'll find Jason Staley's article of interest below. He points out that while markets have been generally positive in 2019, there are still reasons to be cautious.

As always, please feel free to call us with any questions or comments at 412-697-5331.

Take Nothing For Granted: Make Sure Your Cash is Working For You
by: Jason Staley, CFA, CAIA

While the rebound in equity markets over the past six months (except for a rather unpleasant May) has been quite enjoyable, it has come with a cost: falling bond yields. There was a sense of optimism emanating from savers, that after a decade of being punished with historically low interest rates, they would finally begin to be compensated for cash held in their checking and savings accounts. The benchmark 10 year U.S. bond yield began the year at 2.66%,1 with many market participants forecasting the yield to reach 3% by year end. It stood to reason that if the benchmark yield (from which most interest bearing investments are based off of) is rising, savers could expect the yields in their checking and savings accounts to rise as well.
However, the quiet optimism that these savers brought into 2019 (who have been forced to sacrifice for a decade in order to help heal and stabilize an economy coming off the worst recession since the Great Depression) would expeditiously evaporate. A destructive mixture of geopolitical uncertainty, uneven trade policy, and conflicting capital market signals led investors to cool on their expectations of global growth. The abrupt turn in market sentiment led bond yields to fall precipitously, with the benchmark 10 year U.S. treasury yield falling from 2.66% to 2.00%, a decline in yield of 25%.2 In October of 2018, a FDIC-insured two year CD yielded 3.05%,3 while similar FDIC-insured two year CD yields are now yielding 2.15%.The ramifications of the decline in yields in the U.S. Treasury markets quickly manifested in savers losing out on interest income.
The compression in yields is forcing investors and advisors to, once again, be more creative in finding suitable cash/cash equivalent investments. It has been well documented that banks are not going to reward clients with increased yields in traditional checking and savings accounts.5 Rather than pass through interest rate increases, as the U.S. Federal Reserve increased the overnight lending rate (referred to as the Fed Funds Rate) over the last four years from 0.0% to 2.50%,banks have kept the majority for themselves. This previously mentioned dynamic is how you get a Fed Funds Rate of 2.5%, but checking and savings account yields remain between 0.3% and 0.5%.
If you are sitting on excess cash or thinking about investing in a CD, please reach out to your SDWMA advisor. There are many options to consider, including options you may not be aware of. The ever changing landscape in fixed income markets demands a fluid and evolving response by clients and advisors alike. Take nothing for granted, make sure your cash is working as hard for you now as you did to earn it.

3UBS Bank USA 3.05% FDIC INS Due 10/29/2020 CUSIP 90348JFH8, Morgan Stanley Bank 3.05% FDIC INS due 11/02/2020 CUISP 61690
4Charles Schwab Institutional Trading Desk Figures as of 6/25/2019; subject to change

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as investment, tax or legal advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.

Cyber Security Tip

How many Internet of Things (IoT) devices do you have? IoT includes smart speakers, plugs and appliances and anything that accesses your Wi-Fi. Cyber thieves can hack into devices and gain access to your network. Keep security patches up to date, make sure each device has a unique password, and ensure your router has a strong password and is encrypted. When you are traveling, unplug before you go!

Please welcome our newest team member:
Paulette (Polly) Aites

Polly joined our team as the Director of Operations in May with more than 14 years of experience in the financial services industry.  Polly is excited to bring her experience, knowledge, and passion for improving efficiencies and processes to her Schneider Downs team, coordinating and participating in similar activities.

What We're Reading
The Point of It All
By: Charles Krauthammer
Recommended by Jason Staley

Charles Krauthammer was one of the most influential thinkers of the last 25 years. He had a syndicated column in the Washington Post, and was a Contributing Editor of The Weekly Standard since its founding in 1995 through 2018. This book is a compilation of essays, speeches, and position papers that spans the entirety of Charles' career, and delves into personal, political, and philosophical issues that had significant impact on events of the day. Bookended by a moving introduction from Daniel Krauthhammer, the author's son, and Daniel's eulogy of his father who passed away in June of 2018, there is something in this book for everyone (including many articles on baseball, a particular passion of the author).

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Independence Day Holiday Hours

Our office will be closed on Thursday and Friday, July 4th and 5th. Please reach out to us prior to that if you have any expected needs during that time.