- The FED is predicting long-term average interest rates of around 3%, not the 7% that used to be the case.
- Even small increases in interest rates will have a huge effect on yielding assets’ values.
- Even Yellen it telling us that productivity is the main factor for growth, so add it to your portfolio.
There are two main drivers of what can be done to improve the economy. One is new inventions and structural reforms that increase productivity, while the other is monetary policy. As the former takes time to get results, we mostly talk about the latter. We can assume that increased knowledge and structural reforms take care of themselves. Companies are always investing in new technologies, and governments, no matter what kind, slowly push for social and political improvements. The results can only be seen if we look at it in the long term. The quality of our lives is much better now than it was 20 years ago and 20 years from now will be even better. More →