Will The Increased Interest Rate Affect Us

 

sleeping_giant_cartoonSo many are wondering will the increased interest rates affect us and where will be the best place to invest their money now that the Fed raised rates?Carolyn McClanahan, a certified financial planner and founder and director of financial planning at Life Planning Partners, sees opportunities in bonds. In the short term, the stock market will probably get a boost and bonds may take take a hit. But longer term, rising rates will be bad for stocks; therefore, investors may want to evaluate their portfolios and move out of some equities and invest more in bonds, she said

For the past seven years, low rates have made bonds relatively unattractive, and the stock market comparatively more attractive. When rates go up, some of that money will tend to flow back into bonds and away from the stock market, so investors need to pay close attention to this, said McClanahan.

If you invest at all in stocks and bonds, even if you just have a 401(k), this Fed rate hike will be important to you and your portfolio. It could trigger volatility in stock and bond markets, which are already on a roller coaster ride. Stocks can continue to gain, but investors may need to be choosy. Stock investors don’t necessarily need to fear rising interest rates, but some sectors could fare better than others

As of today, our markets are being controlled more by what the oil is doing, last week DOW was down because oil started dropping again, but today DOW is up due to the fact oil is up higher than it has been in over a week. If oil will keep going up the market will keep doing well, although Gold may take a hit since it is down today.So far the increased interest rate hasn’t made a change in the stocks, but time will tell. For some reason when the dollar goes up oil goes down but when the EURO goes up which it is doing now because it has pretty much bottomed out then oil seems to go up. The dollar seems to be just staying or going up slightly and also when the dollar goes up then Gold goes down. So you really need to keep an eye on the market. It really may be time to invest in oil because oil should not drop much lower then it already is.

It is too early to see how the higher interest rate is going to affect the housing market but here again time will tell. I think the rate has not gone up enough to change the market unless we begin to see a big change in unemployment. Hopefully, Unemployment won’t begin to hit right away but should begin as companies get hit with the higher interest rate and have to  try to make up for the added expense. If you want to buy a house this is the time to do so while the interest is still down, but it would be wise to keep the payments low to what you can handle because who knows what are economy will be like in the future.

What Is Gold Doing Now

 

ca. 1990-2000, Zurich, Switzerland --- Gold bars of various weight stacked in the vault of the Credit Suisse Bank. --- Image by © Charles O'Rear/CORBIS

Have you been wondering what is gold doing now, are the stocks going up, should you we buying gold and silver, who knows. The last few days gold and silver have been climbing and appears to be going up more than just a few cents. The dollar seems to be having a trouble either dropping or staying in value but not going up like the Euro. It seems too many things are going on to make the market take a stand one way or the other.

Wage gains, a strong dollar, demand weakness overseas, a U.S. manufacturing slowdown (weakest month since 2009) and low commodity prices are all pressuring corporate profit margins in a big way. Since 1973, such a drop in profitability has only been seen during recessions, save for the lone exception of the 1985 profitability downturn.

The drop in profitability has resulted in aggregate S&P 500 earnings setting a pattern of lower highs and lower lows, according to data compiled by Yardeni Research — a pattern last seen in 2007-2008. S&P 500 aggregate revenues are contracting at a 4 percent annual rate, a level of contraction not seen since the recession was ending.

If profitability is contracting, Credit Suisse warns that the top of the bull market may have already been set: The peak of the last four bull markets occurred within 12-to-18 months after the peak in profitability. So if you’re an optimist, you’ve got to find a thesis that justifies a powerful rebound in profitability.

With factors like a weak labor market, ultra-low interest rates, high energy prices and an emerging-market credit boom have all come and gone. Even the saturation of the smartphone market is casting a pall over the enthusiasm for one-time favorite stocks like APPLE. Biotech is under political pressure. The Internet of Things, autonomous vehicles, machine learning and other new-tech developments are hopes for the next cycle.

Late-cycle dynamics are coming into play: Higher interest rates, higher labor costs and higher corporate debt default rates. All will further pressure overall profit margins, causing  Wall Street to batten down the hatches.

Especially in the bond market. The yield curve — the relationship between short-term and long-term interest rates — is quickly flattening at the same time high-yield or “junk” bond prices are weakening. According to the team at SentimenTrader, this has only been seen three other times on a long-term basis: Before bear markets in 1990, 2000 and 2008.

What does this all mean, will the Federal government think our economy can stand and increase in our interest rate since there has been an increase in jobs and the jobless rate remains the same. The increase in wages can verify the increase in interest, who knows, but we will find out on the 15th of December. Hopefully, our economy can handle it, but everyone is becoming antsy and gold is climbing just how much its going to climb and how long it will continue to climb who knows, but maybe we need to decide whether to buy gold and silver or stocks.