On December 14, the Federal Reserve announced that they were
hiking the Fed Funds rate by 0.25%. This is the rate that financial
institutions lend money to each other overnight and has a trickle-down effect
other interest rates in the domestic economy.
This increase is indicative of a larger trend – it comes
after an equal-sized interest rate increase in December 2015. Further, the
Federal Reserve indicated in the announcement to expect 3 additional hikes over
the next twelve months.
If each of the 3 hikes in 2017 will be of the same
magnitude, then the year will finish at a 1.5% Fed Funds rate. This presents a
dramatic change to our interest rate environment given that short-term rates
have been held near zero since December of 2008 to provide economic stimulus.
Investors should make themselves aware of the effects that
these rate increases may have on their portfolio, as interest rates have a
large effect on the price of real assets.
This article will discuss the effects of rising interest
rates on dividend stocks.
Comments
Post a Comment