20/09/2022
I found this article from Forbs very helpful during client engagements.
As investors we need to understand the current investment climate. Interest rates across the world are expected to keep rising for the foreseeable future to help curb inflation.
How will this influence my equity portfolio?
Key takeaways:
1. Short-term equity returns will be mixed and ambiguous.
2. Major stock markets like the Dow Jones and S&P 500 still deliver positive long term returns even during rising interest rate cycles.
“You don’t have to reach back that far to find evidence that challenges the idea that rising rates lead to falling stocks. In 2017, the Fed raised rates three times—and the S&P 500 climbed more than 18%.” (Forbs Jun 23, 2022)
3. Rising interest rates benefit certain sectors like banks while hurting for example start-up companies.
Conclusion and my advice
Stick to your investment strategy. Be sure to use active managers during these periods. Speak to your financial advisor.
Hope you found this helpful.
Please share your thoughts in the comment section and get in touch if you need advice.
Congress has tasked the Federal Reserve with the job of keeping the U.S. economy running as smoothly as possible. If the Fed believes the economy is lagging, it can cut the federal funds rate to make borrowing money cheaper for individuals and businesses. This move typically pushes up stock price
