The Fed is expected to raise interest rates again, should you care?Submitted by LWM | Linden Wealth Management LLC on September 25th, 2018
The Federal Reserve is expected to hike short-term interest rates for the third time this year. A fourth hike is expected in December with forecasts for as many as three more next year. With each successive hike, the yield curve flattens and with that the potential for an inversion.
Should ordinary investors care about the slope of the yield curve? You bet they should. A yield curve inversion has preceded all seven recessions since 1970. A recession would likely lead to an equity bear market where stocks decline 20% or more in value.
For now, the Fed seems content to continue to raise short-term rates gradually. Economic conditions remain favorable. Equity markets have strong underlying support.
The real test could come in late 2019 or early 2020. If the economy and inflation get out of hand, the Fed would be forced to hike rates more aggressively, increasing the chances for a yield curve inversion and bear market.
As a fiduciary and fee-only advisor, I don't make money by selling financial products. I'm free to recommend the strategies and investments that make sense for couples and individuals, based on a clear understanding of where you're headed in life.
If an open conversation of this kind will be helpful to you, request an appointment now. Feel free to call out any specific questions you'd like me to address.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.