Tag Archives: Higher Interest Rates

It’s been a long time …. since rates have been increased

Later this week – (actually TODAY – this post was set to go out on Monday but did not), Janet Yellen, head of the FOMC (Federal open market committee) are set to do something many have never seen before.

 It’s been a long time

It’s hard to believe, but it’s been almost 10 years since short-term rates have been increased. Given this fact, the end of the quarter, AND the end of the year, it’s not surprising capital markets are a bit jumpy. It will be interesting to see if the Fed does increase rates, which we have hoped for some time. A measly .25% will make very little difference to the overall economy, and may actually help gain confidence, setting the stage for potential slow and steady continued increases.  The Fed has reiterated that they are data dependent …. Making further increases unpredictable, at least getting off of zero, again in our opinion, is a good start.

Fed Funds Rate 10 yr 11 -15

It would not surprise us, to see Capital Market’s put on a happy face after the FOMC meeting later this week. Until then, we will stay tuned!

John A Kvale CFA, CFP

http://www.jkfinancialInc.com
http://www.Street-cents.com
8222 Douglas Suite 590
Dallas, Texas 75225

 

 

Nice Economic Report Adds to Our Theme … Raise those rates Janet!

The regular monthly smorgasbord employment report released last Friday (2-5-15), continued our theme (higher rates), with even more positives than we had expected.

Digging Deeper than just the Headlines

While the USA generated 257k (first estimate, will be revised) new jobs for the month of January, the action was elsewhere.

  • Average hourly earnings were up .5%, this is a huge number and very good for the employment situation as employees may FINALLY be getting a raise!
  • Unemployment rate went UP (increasing labor participation rate), but that is because more people entered the workforce, again VERY good for the economy!

Higher Rates – 10 Year Yield Rises

10 Year 2-6-15

While all of this is good news for the economy, these are headwinds for the capital markets, in the SHORT term (1-2 years)  …. longer term this is very good news, as it helps support the frothy valuations and gives us more confidence that the Fed will be able to raise rates this year … FINALLY!

Janet Yellen and the other Federal Open Market Committee (FOMC) members … Raise those rates !

Have a Great Day!

John A. Kvale CFA, CFP

http://www.jkfinancialnc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

 

Funny Thing Happened on the Way to HIGHER Interest Rates

Most, including ourselves, called for higher interest rates at the beginning of 2014. Just another reason not to leave your asset allocation wing man, even if certainty looks inevitable (no certainty in investments.) Funny thing…rates did not listen !

Interest Rates Drop Like a Rock Around the Globe

We have been exhausting the interest rate discussion, but it is extremely important.

  • FOMC (Federal Open Market Committee) stopping  the artificial push down of rates through fixed income purchases (by far largest/most important issue)
  • Economic Growth picks up
  • Money flows OUT of Fixed income

These are all text-book reasons rates SHOULD be rising.

Rates aren’t listening !

The following chart is possibly the reason they are not … by the way as mentioned in our August Video, interest rate parity is a financial rule that says you should not be able to invest cross border and gain the higher rate advantage … maybe the text books are not right. Doubtful, time will tell !

9-5-14 Global 10 Year Yields

With the US and UK being very liquid and safe options, foreign investors may be chasing our “higher” yields … even though they seem low to us.

Have a Great Day!

John A. Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225