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  • Leonard Brecken

2 Year Treasury Yields Hit Cycle Highs

Today on the back of very strong retail sales via the Commerce Department for June, 2 year Treasury Rates hit cycles hot seen since 2008. WHY SHOULD YOU CARE? Well for one it indicates the likelihood of more rate hikes from the Federal Reserve. The second it points for a fairly high likelihood that Gross Domestic Product will be much stronger in 2Q vs 1Qs 2%. That is great for small business owners in short term. I do want to remind small business owners that while the good times are ongoing it's NOT the time to get complacent. PLANNING REQUIRES ANTICIPATING WHAT'S TO COME. In the late stages of economic recovery margin pressures begin as growth accelerates. If business owners aren't wary of the margin pressures from higher financing costs AND higher cost inputs the amount of profit from those higher sales can get diminished. MOST BUSINESS OWNERS I RUN INTO AREN'T PREPARING FOR THIS NOR THE INEVITABLE WHEN RATES RISE TOO FAR AND GROWTH SLOWS. As the chart below shows 2 year Treasury rates aren't close to where they were in 2007 indicating that many more rate hikes can potentially happen slowing the economy. The question is as a business owner to do know as rates rise and cost pressures build as growth begins to slow sometime in future what the impact will be on your business? Do you have the cash flow to sustain such events? When we create a numeric model of your business we answer these questions & more!

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