Get thee to a two-year CD.
OK, it’s not exactly the Sermon on the Mount, but it’s the best advice a certificate of deposit investor may get this week.
Last week, 24-month CDs were the only category that saw an up-tick, according to the BankingMyWay National CD Rate Tracker – barely rising to 1.566% from 1.565%.
Hey, at least the two-year CD saw a gain – everywhere else saw rates slide back yet again, albeit slightly so.
Take the short-end of the ladder, where three- and six-month CDs fell to 0.53% from 0.55%, and to 0.81% from 0.82%. Or the long-end, where four-year CDs fell ever-so-slightly to 2.05% from 2.053%. Five-year CDs weren’t any better, falling to 2.24% from 2.244% for the week.
Most likely, CD rates took their cue from U.S. Treasuries, which fared even more poorly. The bellwether 10-year Treasury fell 34 basis points last week, to 3.55% – a slump economists blame on the uncertainty about the U.S. economy.
Despite headlines that tout the Federal Reserve’s belief that the Great Recession is behind us – at least the worst parts – and despite a U.S. stock market that has evidently priced in an economic recovery, anxiety still resonates with consumers.
But certainly not with stock investors. As of Aug. 1, 369 of the 500 stocks measured by the Standard & Poor’s 500 are up for the year, compared to 131 down.
The bulls also dominate TheStreet.com’s RealMoney Barometer Index, polling in the majority – the vast majority – for the fifth consecutive week. According to the survey, of the 2,484 votes cast, the bulls polled 1,328, or 53%. The bears posted barely half that, at 724 votes, or 29%. (Ironically, voters tapped commercial banking as the sector most likely to both rise and fall).
But even with a rise in stocks – Monday’s 186-point dive in the Dow Jones Industrial Average notwithstanding – perhaps Treasuries are telling the more accurate tale. With longer-term bonds sliding again, CD rates are more likely to follow Treasuries than they do the stock market. It’s a pattern worth watching – when longer-term bonds are down, look for CD rates to follow.
Also look to Washington, where politicians have added $181 billion to our national debt – and that’s in July alone. Bank investors, like stock market investors, are a unique lot. They don’t believe in red and blue states – the only color that matters to them is green. To that end, a government policy of ratcheting up debt and using profits (via taxes) from strong sectors to prop up weaker ones is unsustainable.
As the length and breadth of all these issues guarantee that nothing economically will be settled anytime soon, expect CD rates to keep floundering – with more weeks like the one we just experienced.
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.