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AAII Community Dividends Fixed-Income Strategies

Musical Chairs With Interest Rates: An Income Investor’s Adventure

Visit the Income Investing Community to share your take on what’s ahead for interest rates and how it will affect your income strategy.

by Jenna Brashear | August 2024

Stuck in an investing limbo lately? Bombarded by conflicting market trends and economic forecasts (can we even trust those anymore)? Predicting interest rates is like a game of musical chairs, especially with a presidential election on the horizon. What lies ahead for the latter part of 2024 and into 2025?

I’m launching a new series of income and dividend investing questions that cover cash flow, diversification, risk, inflation and more. To start, I’m curious to hear from those in our robust Income Investing Community, with over 720 AAII members nationwide:

At age 29, I’ve gained tremendous insights from this community’s discussions, learning from those who’ve navigated every market cycle. I’ve asked some tough questions and found invaluable wisdom shared by experienced investors.

Whether you rely on dividends or bonds for income, or you’re just dipping your toe into the pond of income investing, I want to hear your take on potential interest rate cuts this fall. After the roller-coaster years since 2020, one thing is clear: We never quite know what’s around the corner. In times of uncertainty, I find solace in forums like the Income Investing Community, where diverse perspectives challenge my thinking. So, join me and fellow investors in exploring these questions.

If you or someone you know could benefit from these conversations, visit https://community.aaii.com, log in with your AAII credentials and join the Income Investing Community, or another special interest group (SIG), today!

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Field Notes From the Chapters

There is nothing on our planet so obscure or outrageous that you can’t find a museum devoted to its preservation. There are museums dedicated to mustard (Wisconsin), dog collars (England), hair (Turkey), vampires (France), bad art (Massachusetts), ramen noodles (Japan), toilets (India) and spam (the edible kind, Minnesota). And the Museum of American Finance in New York City.

We wouldn’t suggest that AAII’s chapters have much in common with museums EXCEPT to point out that, in addition to our ongoing stream of current programs, our communities archive a treasure trove of resources that won’t go out of style anytime soon.

Among the chapters that have populated their online AAII Community libraries with slides, recordings and program notes are Austin/San Antonio, Eastern Michigan, Greensboro, Houston, New York City, Puget Sound, Rochester and Twin Cities.

Every community has a discussion board for members to post questions, comments and the occasional rant. You can contact other members individually to set up informal SIG meetings. And you don’t have to live in the neighborhood to sign up and reach out. All AAII communities are open to all AAII members, free of charge.

Don’t overlook the power and potential of our Local Chapter communities for one-on-one connections and solitary exploration. Whatever drives your interests, we hope you’ll let our chapters be a stop along the way.
—Hollis Wagenstein-Hurturk, AAII Chapter liaison

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Discussion

JOHN L from NJ posted almost 2 years ago:

Investors who need income should be agnostic about where they get cash flow; dividends, interest payments, and capital sales. Changing portfolio allocations to create cash flow is a mistake. Any investment strategy that relies on forecasting is doomed to failure because the future is unknown and forecasting fails most of the time.


BARRY J from TX posted almost 2 years ago:

Jenna, to keep your original metaphor going ... today Friday 8/2 .... the music stopped ... and chairs were hard to find. This "correction" was foreseeable. (I love the way the industry perfumes bad outcomes). Historical data says we should have expected a "correction" (sometime prior to) NBER's (always backward-looking delayed) declaration that we are in a "recession." So, expect to find out AFTER the election that we have already been in a recession since 3Q24. And as we have learned from past "corrections" in 2000, 2008, and now 2024, the markets will recover and chairs at the trough will be aplenty again. Quality control uses the term "mean time between failures" to calculate the expected time until the next quality failure occurs with the goal to improve the process so we can extend or better yet prevent the next failure. Unfortunately, although markets ARE (Markov Chain) processes, market corrections do not lend themselves to improvement or prevention. However, using the data since 2000, the MTBF for SPX can be estimated as (8 + 16) / 2 = 12 years or about 7 times in EVERY 84-year lifetime ... and... 4 times in every 48-year investment lifetime from working age (around 21) to retirement (around 69). Was 2000-2024 an anomaly? If so, why?


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