We could be at the end of the Fed’s rate hikes.
Is the Fed done raising interest rates? Many analysts are beginning to join the camp of no more rate hikes. No one knows for certain, but if the Fed is in fact done raising rates, then what will that mean for your finances?
Stocks
Stocks have been volatile for the past year from rate hikes and other macroeconomic factors. One area that is particularly sensitive to high interest rates is tech stocks.
One of the main reasons for this is due to a lot of technology and startup companies using borrowed money to fund their businesses. As rates rise so do borrowing costs. This causes profits and growth prospects to shrink.
Moguls in the tech fields are calling for rate cuts. Whether that happens in the short-term is unknown, but if the Fed does in fact pause hiking rates, then many technology stocks should start to stabilize and could come back.
As an investor, you could profit from these companies should their stock prices start to rise.
Real Estate
Real estate has been hit hard by high rates both from buyers trying to get mortgages and by investors who have seen investments in real estate stocks and REITs suffer.
REITs are popular with investors due to their passive nature and their typically high yields. But as rates rose over the past year REITs tumbled in value.
If rates don’t push higher, then REITs may start to benefit and recover.
Savings
If you have cash savings, then you have benefited from high interest rates over the past year. The latest rate hike will push your returns even higher, but if the Fed is in fact done raising rates, then now may be a good time to look into locking in your rate.
Buying long term CDs or treasury bonds make sense if you believe that rates are done going up and might start to fall in the future. Again, no one can say for sure when rates will be cut, but we could be at the end of seeing rates going up, so locking in high rates could make sense if you don’t need to access your money near term.
Conclusion
Is the Fed done raising interest rates? No one can say with 100% certainty, but many experts are starting to believe this to be the case. If it is, then as an investor, you will want to start paying attention to technology and the real estate sectors of the markets. Both could benefit from a stabilization of rates. You will also want to look at your cash holdings and consider locking in higher rates.
Read Also:
What do Rising Interest Rates Mean for Your Finances?
Mortgage Rates are Pushing Towards 7%
Why has the Stock Market Been So Resilient in 2023?
Writer and Investor. Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.