Interest rates…What’s next?
07 Sep 2016
I came across these recent headlines…”The cost of higher rates” followed by “The pain of zero interest rates.” Confused?? So am I.
It just goes to show, you can find about any article, if you look hard enough, to argue two sides to any story. After reading both I have come to a startling conclusion. No one really knows when, how much, or why interest rates may or may not go up. I put this in with the “we can’t control” box that I try to not spend a lot of time on. Kidding aside, rising interest rates and keeping rates low both have positive and negative outcomes. It all just depends on which side of the fence you are on and for how long.
If Rates go up…
– We pay billions more on our already staggering $18.1 trillion national debt
– This will eat into increases in federal revenue in the future
– The cost to borrow money will increase-May slow down growth. Less Refi’s and higher interest charges on credit cards
– Bonds will suffer ( inverse relationship with rates)
– There may be short term heightened stock market volatility
– CD and cash equivalents will earn more-Good for conservative investors and senior citizens
– Banks may have an incentive to loan out reserves at a higher rate which may boost economic growth
– The Dollar may strengthen as Fed raises rate so European travel may look better ( book those tickets!)
– The stock market “may” do well as investors focus back on market fundamentals and not the fed tinkering with policy
– People sitting on the fence to borrow for a house may now seem the timing will never get better. Could stimulate homes sales and the economy?
Ok….ok…I hope I have demonstrated that no matter WHAT happens someone will benefit. Let’s just hope that someone is you! I wanted to thank “Jim” for inspiring me to write on this topic–Good luck! Jeff