Rates moving on up

Winter storm Stella was a bit of dud here in New York after all the hype in the news.

Meanwhile, investors rejoiced as the Fed raised the Fed Funds Rate by 0.25% and plans on two more hikes this year. Two weeks ago a rate hike in March was a 50/50 probability. Then is shot up to nearly 100%.

Displaying image002.png

US Bonds have been selling off the past two weeks on the news of higher rates.

For US Equities, higher rates should be good for financial stocks, like banks, and not great for real estate stocks.

Displaying image004.png

The fall in Energy stocks is not related to rates, but should be no surprise after my post last week. High Yield Credit sold off a bit last week due to Oil but seems unaffected by the rate hike. The demand for junk bonds is incredible.

The last time we had a prolonged rate tightening cycle Emerging Markets Equities outperformed US Equities by 3 times. Wowza!

Displaying image006.png

What does all this mean?

Not much for now. It should become more expensive to borrow money for things like a house or car in the future. However, there are many other factors that go in to borrowing rates and 0.25% is not much of an increase.  Overall the US economy is showing signs of healthy growth which is good.

Have a great weekend!

The Risk Runner

 

 

You may also like