The low interest rates of the past four years have been helping corporate America to put a bundle of money away. Not only have they been showing record profits by hoarding mounds of cash, they have also been able to borrow money at rates that are making it nearly impossible not to have a positive return.
Two weeks ago the Fed announced that the present policy would be extended for at least two more years. They project that by 2014 unemployment will be near 6.7 % and the present policy of near zero interest rates will have inflation rates no higher than 2%.
When the banks lend to small business they are taking a bigger risk than when they lend to multinational corporations. If their margins are not large enough to make this risk worthwhile they won’t lend at all.
Now many economists are seeing some issues with these rosy predictions. They feel that although big business is prospering the small businessman is not feeling the joy, and two more years of this could lead to a new round of stagflation.
Average Joe doesn’t benefit from ultralow interest rates, just ask the Japanese. Rising interest rates, not hyperinflation, benefit Average Joe and the current Fed policy will not ever benefit him.
Will the Fed feel the pressure to allow interest rates to move to a more moderate level?
Will higher interest rates cause the markets to falter?
We will react to the market that higher interest rates produce.
That will take discipline, and that is what I can teach you. How to react to the challenge of any changing market, and turn it into an opportunity.
To learn firsthand how I would trade a market with the potential of rising interest rates speak to one of my representatives and sign up to work one-on-one with me here:
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As Always,
Keep those stops tight.
Todd “Bubba” Horwitz
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