It has been a while since the Fed raised interest rates. Specifically, the last time they did was in 2006. What was the world like in 2006? For starters, there were no iPhones, Instagram, or Twitter and “You’re Beautiful” by James Blunt was a new song. The world has changed significantly since that last rate hike. In the roughly ten years between then and the next potential rate hike in the coming months, a new group of graduates have entered the finance job market as financial advisors.
According to data from eVestment, 13.9 percent of financial professionals have no experience with an interest rate hike. Jeremy Hill, managing partner for Old Blackheath Companies, wrote, “There are more junior varsity Fed watchers commenting on this potential policy change than ever before.” Meanwhile, Douglas Kass, president of Seabreeze Partners Management said, “The general lack of experience of many investment professionals also applies to the lack of experiencing a bear market in bonds—and inexperience of a bear market in stocks. We have been in a bull market for bonds for over three decades and a bull market in stocks since 2009.” Kass explained that, “The lack of experience will likely be manifested in a lot more volatility across numerous asset classes.”
Hill also argues that some areas will experience a lot of volatility, “like the two-year U.S. Treasury note” and that will be interesting for traders who have never lived through rate hikes. Hill added, “I find it far-fetched that a 32-year-old is going to be allowed to take a big amount of risk.”
While plenty of professionals think a lack of experience will hinder some traders and financial experts, others believe that experience may tempt some people into being overconfident. Jason Trennert is the managing partner at Strategas Research Partners and says, “If you’re older, it would be tempting to think that your experiences will help you as rates rise, but I’m not so sure. Unfortunately, it’s doubtful that either youth or experience will be much in help in the aftermath of unprecedented monetary stimulus.”
Market volatility and an interest rate increase are certainly important factors for investors, but finding good opportunities and managing your money intelligently are equally important for your personal wealth. Contact an expert at Apex Financial Advisors today to get the experience and innovative professional financial advice you need.