Interest Rate Hikes
Most of the redirect I am reading is confined to a conventional interest rate and inflationary environment. This is not where we are as interest rates have been low for an abnormal amount of time as well, the governments purchasing of bonds and mortgage backed securities is not typical either. Now we have to weigh in whether or not the governments unwinding of these products will affect the markets/economy.
Keep in mind as we hear that businesses will feel the impact of interest rates on their earnings, yes they will. However, companies invest their daily receipts into Certificates of deposit, money Markey accounts and bonds to a degree. Therefore I think there is a trade off as corporate America will benefit from the rising rates as they can increase income. That being said there is that point where companies are going to need to increase their debt and at that point you will see a capitulation where the interest on new debt will outpace the interest earnings. Mr. & Mrs. Retired Main St. will get a boost to their income through fixed income assets such as certificate of deposit, bonds Corp & Municipal and money market accounts. Anyone retired invested in stocks should be reevaluating their portfolios as well as those who will be entering retirement in the next 5 to10 years.
I remember a time when mortgage interest was 10%. Don't let the doomsayers wreck your outlook, interest rates have been artificially low for a very long time and it is time they returned to healthier levels. Fed funds should be 4.0% to 5.5%, mortgage rates should be in the range of 4.0% to 6.5% unemployment rate 3.5% to 6.0%. The low end of these ranges is very good with just the right amount of pressure in their respective sectors, the same to the high end. The middle is porridge for Goldie Lox. just right. So I believe that a quick rise in current rates is the best medicine as the government is shedding bonds and mortgage backed securities, this should be easy since investors will chase the higher yield on new issuance and the feds won't need to back off the winding down of its balance sheets. Also we will see a normalization return to the housing market, as houses shouldn't be traded like company stock, it isn't healthy. The jump in mortgage rates is surprising and concerning but hopefully when they get to 4.5% to 5.0% we will see stabalization.
Keep in mind as we hear that businesses will feel the impact of interest rates on their earnings, yes they will. However, companies invest their daily receipts into Certificates of deposit, money Markey accounts and bonds to a degree. Therefore I think there is a trade off as corporate America will benefit from the rising rates as they can increase income. That being said there is that point where companies are going to need to increase their debt and at that point you will see a capitulation where the interest on new debt will outpace the interest earnings. Mr. & Mrs. Retired Main St. will get a boost to their income through fixed income assets such as certificate of deposit, bonds Corp & Municipal and money market accounts. Anyone retired invested in stocks should be reevaluating their portfolios as well as those who will be entering retirement in the next 5 to10 years.
I remember a time when mortgage interest was 10%. Don't let the doomsayers wreck your outlook, interest rates have been artificially low for a very long time and it is time they returned to healthier levels. Fed funds should be 4.0% to 5.5%, mortgage rates should be in the range of 4.0% to 6.5% unemployment rate 3.5% to 6.0%. The low end of these ranges is very good with just the right amount of pressure in their respective sectors, the same to the high end. The middle is porridge for Goldie Lox. just right. So I believe that a quick rise in current rates is the best medicine as the government is shedding bonds and mortgage backed securities, this should be easy since investors will chase the higher yield on new issuance and the feds won't need to back off the winding down of its balance sheets. Also we will see a normalization return to the housing market, as houses shouldn't be traded like company stock, it isn't healthy. The jump in mortgage rates is surprising and concerning but hopefully when they get to 4.5% to 5.0% we will see stabalization.
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