Interest Rates

  • 24 Jun
    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    • The risks of a slowdown are higher than the upside.
    • Fundamental trends are negative in advanced economies while emerging markets show higher growth rates and are cheaper.
    • It is important to create a diversified portfolio with uncorrelated assets.

    Introduction

    In an environment where it seems maximum potential for the U.S. economy has been reached, the St. Louis FED chief, James Bullard, has said in his most recent report that he favors only one interest rate increase through 2018, which would at best keep things stable. His view is further supported by the fact that the unemployment rate is sitting at below 5%, and the Personal Consumption Expenditures PCE inflation—measured by the Dallas FED—is at 1.84%, both of which signal that the economy has reached its maximum potential. More →

  • 23 Jun
    Will There Be A Long Term Impact To The Fed’s Shift In Rhetoric?

    Will There Be A Long Term Impact To The Fed’s Shift In Rhetoric?

    • A positive outlook seems more political than realistic as the FED is out of maneuvering power.
    • Keeping interest rates unchanged is the best and the only thing the FED can currently do.
    • Low interest rates will weaken the dollar, boost exports and increase corporate earnings in the upcoming earnings season.

    Introduction

    In FED’s Chairwoman Yellen semiannual policy report, the rhetoric has significantly changed since the last report in February. In short, the full employment target is almost reached but the inflation rate is still below the targeted 2% and the expectations for the reaching of that target have been changed from short term to medium term. Further, the latest job reports show a slowdown in jobs increases which creates a bit of a scare. The FED estimates the slowdown to be transitory. More →

  • 29 Apr
    Monetary Policies – US, Europe, Japan and China

    Monetary Policies – US, Europe, Japan and China

    • Central banks hesitate to increase interest rates.
    • Monetary easing does not manage to fuel inflation.
    • If inflation arises stocks should be the best protection.

    Introduction

    The central bank of a country determines the base interest rate at which it gives loans to banks who add a risk premium and give loans to corporate and private customers. The base interest rate is therefore the primary factor for the stimulation of economic growth and reach of target inflation. More →

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