Houston, we have lift off!Dec 16, 2015 | Wealth Management
After a decade of no interest rate hikes and near zero interest rates for almost as long, earlier today Janet Yellen and the FED decided the economy is sufficiently strong enough to absorb an interest rate hike of .25% for the federal funds rate. The stock market got what it was expecting as stocks are up sharply after the news while bonds are trending a bit lower. It is a rather “dovish” stance taken by the FED as Chairwoman Yellen suggested future rate hikes will be gradual and very data dependent.
What does that mean for you? Maybe not much. As mentioned previously, this increase was widely expected and enthusiastically welcomed by the stock market. However, investors need to keep their long-term perspective as short-term volatility could remain especially as the price of oil continues to struggle. Certain sectors tend to perform better during times of increasing interest rates however, with the FED’s cautious tone, there is no reason to believe this will be an environment where rates are increased each quarter. We continue to advocate a conservative posture regarding bond duration. Additionally, just because the fed funds rate has increased, doesn’t mean bank deposit rates or CD rates will increase any time soon. However, the prime rate tends to follow the fed funds rate so loan rates that are variable based on the prime rate will most likely increase. Variable rate credit cards may be affected as well.
It appears many people are far more concerned about what costume they are wearing to the new Star Wars premier than they are about rising interest rates. However, if you are concerned about how all this movement will affect your portfolio or financial plan, I encourage you to give me a call so we can discuss your situation in more detail.
Have a great day and may the force be with you.
Senior Wealth Advisor
Investments offered by Wealth Management Division at Bank of the Bluegrass & Trust Company *Are not FDIC Insured * Are not Bank Guaranteed * May Lose Value*
The information presented in this blog is general in nature. It is not intended to provide, and should not be relied upon for accounting, investment, legal or tax advice. Investors should consider their individual financial circumstances and the inherent risks of investing prior to making any investment decision.
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