Fed Gets Aggressive: What’s It Mean for Investors?

After the recent disappointing inflation report, the Federal Reserve raised interest rates by 75 basis points—the largest Fed increase in 28 years. Kathy Jones, Schwab’s chief fixed income strategist, joins Mike Townsend to discuss the implications for the economy and the markets of the Fed’s aggressive move. They also consider whether corporate bonds are a good option in this environment and how the bond market is acting as a signal that a recession may be with us soon.

Mike also provides updates on two bills―one dealing with retirement savings and the other focused on cryptocurrency regulation―that have begun moving through the Senate. And he highlights the potential implications for individual investors of a recent speech by the SEC chair about his plans for a major overhaul to how the stock market operates.

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Digital currencies, such as bitcoin, are highly volatile and not backed by any central bank or government. Digital currencies lack many of the regulations and consumer protections that legal‐tender currencies and regulated securities have. Due to the high level of risk, investors should view Bitcoin as a purely speculative instrument.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed‐ income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower rated securities are subject to greater credit risk, default risk, and liquidity risk.

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Correlation is a statistical measure of how two investments have historically moved in relation to each other, and ranges from -1 to +1. A correlation of 1 indicates a perfect positive correlation, while a correlation of -1 indicates a perfect negative correlation. A correlation of zero means the assets...