For previous stories on the tax-free bond market, click here. The committee voted to hike the Fed funds rate by of a point. This policy statement was greeted with wild enthusiasm by the financial markets. This policy shift was a clear signal that the Fed was not planning to embark on a series of rate hikes. This is great news for bond investors.
Inflation is the number one enemy of fixed income investments.
Bond investors should be encouraged that the Fed has stated its intention to tap on the brakes again if even a hint of inflation is detected. This stance by the Fed should provide an ideal economic backdrop for bond investors. Bond investment, by definition, is long-term in nature. Any analysis of potential performance requires a snapshot of the current economic environment coupled with reasonable projections of the economic climate in future years. The United States is in the midst of one of the greatest economic periods in its history.