July 2013: What goes up must come down

I thought I would take a moment between barbeques to pen my quarterly letter.  I’ll make this one brief, so we can all get back to some fun in the sun.
 
Anyone that has been following the financial press lately, has noticed that Ben Bernanke and the FOMC (Federal Open Market Committee) have gotten a little heat lately for their hinting that they may slow down Quantitative Easing.  What I heard is: “There is the possibility, that sometime, maybe, if the economy continues to be hunky – dory, that we may think about slowing down our massive purchases of government bonds and mortgage backed securities…” Or something like that.  What did most market participants hear?: “Run for the hills!”  The reaction in the bond market was swift, the 10 yr Treasury yield rose from 2.2% on June 18th to 2.5% on June 21st.
 
Given the change, I thought it would be a good time to review the impacts on our current strategy for bond holdings in client portfolios.

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