Skip to main content
Creditthe economy

What the Rate Hike Means to You

By December 21, 2015October 13th, 2022No Comments

With the Federal Reserve raising interest rates for the first time in almost a decade, it’s natural to ask how it will affect you. The 0.25 percent increase the Fed announced last Wednesday is so modest it shouldn’t impact most individuals significantly. On the sunny side, the hike is a show of confidence that the economy is strengthening, thanks to a falling jobless rate.

But the economic outlook is still guarded, with little inflation, the slump in oil, stagnant consumer prices and a lack of consistent wage growth. Consequently, Fed Chair Janet Yellen has repeatedly indicated future rate increases will be gradual. Raising rates also provides the option to lower them if the Fed wants to stimulate the economy in the future.

Traditionally, savers profit and borrowers lose during periods of rising interest. Mortgage rates may eventually rise, but they are indirectly impacted by short-term rates and more influenced by economic growth and inflation expectations. Except in areas where home prices are already stressed (such as northern California), the broader housing market shouldn’t be upset by any minimal increases that could occur from this first bump. Of course, payments on existing adjustable mortgages may grow with this and future boosts.

As additional adjustments are made, consumers may pay more on auto loans and credit card balances. Sustained increases could also mean growing payments for individuals who took out variable student loans or refinanced to variable rate loans.

Since many segments have already responded in anticipation of the Fed lift-off, the stock market isn’t expected to react dramatically to the rate hike alone. That being said, stocks with high returns, minimal volatility, elevated margins and stable track records historically outperform lower quality counterparts immediately following a rate rise. Shares in financial companies may increase as banks realize higher margins between the interest they pay depositors and the interest they charge for loans. Higher interest is often bad for longer-dated corporate bonds but high-yield and municipal bonds may benefit from an improving economy. Money market yields can be expected to grow.

While last week’s move is expected to produce limited effects, it underscores the importance of a properly diversified portfolio to address your situation. Give us a call if you’d like to re-examine your investments in light of the current environment. Call your Centennial Colorado Investment Advisor Representative Jordan Dechtman at 303-741-9772, email him at Jordan@JordanDechtman.com visit our website at www.JordanDechtman.com to schedule an appointment.

Written by Securities America for Distribution by Jordan Dechtman.

Important Disclosure Information

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Dechtman Wealth Management, LLC [“DWM”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from DWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. DWM is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the DWM’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.dechtmanwealth.com.

Please Note: DWM does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to DWM’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Please Remember: If you are a DWM client, please contact DWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently.

Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Join our newsletter

"*" indicates required fields

Name*