How the Fed’s Rate Hikes Affect Investors

A recent Vanguard blog addresses the issue of the Fed’s ongoing rate hike program and how it will affect investors. Here are highlights: “Higher yields on cash are good news for savers”—the article notes that since the Fed started raising rates in December 2015, investors have moved more than $60 billion into money market funds, and those inflows could rise with further rate hikes. Mixed outlook for bonds—”Bond investors might cringe at our outlook for… Read More

Preparing for Rising Interest Rates

A recent article in Advisor Perspectives addresses a number of issues related to rising interest rates and how investors can prepare for them. Here are some highlights: Yield curve outlook— The article argues that the potential for higher long-term interest rates is “still significantly greater than many forecasters would have you believe” due to the winding down of quantitative easing in Europe, inflation and rising federal budget deficits. The fixed income investor, the article says,… Read More

Rising Rates Hurt Real Estate Stocks

According to a recent article in The Wall Street Journal, the Fed’s rate-hike program is “upending real-estate investment trusts and other stocks with juicy dividend yields that had been thriving in a lower interest-rate environment.” While investors tend to purchase shares of real-estate firms and other stocks like utilities for “safe, bond-like returns,” the article reports, as the Fed implements further tightening, “the payouts on U.S. government bonds are rising and forcing investors to consider… Read More

Will a Stock Exodus Follow Rate Hikes?

In a recent Barron’s article, financial analyst Mark Hulbert wrote that many of the investment advisors he monitors on a regular basis are concerned that high interest rates will entice investors to move their dollars from equities to bonds. He cites the so-called “Great Rotation” theory that emerged in 2011 and predicted a huge shift from bond funds into equity fund as “investors came to appreciate the near certainty that interest rates would eventually rise… Read More

Interest Rates are the Market’s New Boss

Interest rates are now more important than profits for stock performance, according to a recent article in The Wall Street Journal. “The first quarter was very good for U.S. companies, as a brew of corporate tax cuts, solid global economic growth and a weaker dollar pushed profits higher,” the article says, adding that while profits will be strong all year, the first quarter will likely be “as good as it gets.” But as growth slows,… Read More

U.S. Companies Facing $4 Trillion in Refinancing

A recent Bloomberg article reports that U.S. companies will need to refinance an estimated $4 trillion in bonds over the next five years (according to Wells Fargo Securities), a concern for investors due to the rising rate environment. “Corporate America,” it says, “partied like never before on cheap money over the past decade, and now comes the hangover,” the article states. Rising rates means that debt service costs will rise which “could push balance sheets… Read More

Inflation and Stock Price Increases Causing Worry

Earlier this month, inflation and interest rate concerns sent stocks into a “historic and nerve-rattling plunge,” but the market rallied shortly thereafter, leading some experts to say that stocks can continue to rally even if both indicators creep upward. This according to an article in The New York Times. According to Brian Nick, chief investment strategist for Nuveen, while the past 20 years have seen a strong correlation between stocks and interest rates, the same… Read More

S&P Says High Corporate Debt Could Trigger Defaults

According to S&P Global Ratings, tightening credit conditions could lead to increased defaults by companies with heavy debt loads. This according to a recent article in Bloomberg. The article cites a February 5th report issued by the rating agency that says removing the “easy money punch bowl” could trigger a rash of defaults since heavily leveraged borrowers are more sensitive to rate hikes. It cites a global sample of 13,000 business entities showing that 37… Read More

The “Near Perfect” Investing Environment May End Soon

For the past two decades, government bonds have moved in the opposite direction of equities in the short run but have produced similarly strong gains in the long run, representing a nearly “perfect” investment, according to a recent article in The Wall Street Journal. From the beginning of 2000 to the end of 2017, the article says, “holding the latest 10-year Treasury and reinvesting coupons returned 155%, the S&P 500 with dividends 158%, while a… Read More

Ray Dalio Says Market Surge Ahead

 At the recent World Economic Forum in Davos, Switzerland, billionaire Ray Dalio told CNBC that the coming tax cut could lead to big gains for the U.S. stock market. “We are in a Goldilocks period right now,” said the Bridgewater CEO. “Inflation isn’t a problem. Growth is good,” he said, predicting a “market blow off” rally fueled by cash from banks, corporations and investors. “There is a lot of cash on the sidelines,” he added. “If… Read More