“The reality is we are starting to see interest rates come down”
The reality of rising interest rates
The Fed recently took action to raise interest rates because they thought the economy was starting to heat up. The reality is we are starting to see interest rates come down, especially regarding mortgages. The 10 Year Treasure rate has come down from around 2.6 to 2.2 in the last 30 days. For investors with bonds, remember that when interest rates go down, bond values go up.
North Korea’s impact on US interest rates
The uncertainty caused by recent events in North Korea is causing money to come into the US markets. Uncertainty drives fear and when there is fear out there in the world, global investors come to the United States, especially US Treasures and bonds. That high demand reduces our yield and increases the pricing.
Positives for investors
With all the uncertainty in the news, how can any of this be positive for investors? If you are trying to buy a house, you are going to find interest rates a lot lower than you would have thought a few weeks ago. For investors with bonds, we are seeing their portfolios go up. This is also positive for equities positions and people looking for a higher dividend yield than the interest rate. With the right investment strategy, an investor’s different asset categories can benefit you and possibly create a stair step effect as one goes down and the other one goes up.
Small business confidence
In our own country uncertainty has appeared but only to a certain extent. The National Federation of Independent Business (NFIB) had surveyed small business owners who have remained confident through all of this global uncertainty. Though there is a little uncertainty they are still borrowing money and growing their businesses. We are seeing this trend in the markets, as well as in job numbers.
Keep this in mind
Just because US interest rates have gone up and there is a lot of uncertainty in the news does not mean that your portfolio will necessarily go down. The bad news and uncertainty you are hearing may benefit your portfolio. Keep that in mind as we go through this week and the headlines hit. Continue to follow us on Facebook, Linkedin, and Twiter as we will continue to keep you updated there.
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Greg Powell, CIMA
Email Greg Powell here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.