The Plain Bagel: What Rising Rates ACTUALLY Mean For Your Investments
With interest rates meaningfully off their lows and the Federal Reserve set to continue increasing interest rates this year, there’s a prospect that we may enter into a long-term rising rate environment for the first time in decades.
Higher interest rates—representing a higher cost to borrow money—can have huge implications on the economy, but also can impact different asset classes in different ways.
On the YouTube channel The Plain Bagel, a breakdown of historical data is made. It showcases how different assets have fared when interest rates rise.
One key idea among investors right now is that the stock market may underperform. That’s certainly true. But that doesn’t make bonds an obvious investment here. After all, rising interest rates mean falling bond prices. And as long as the price of something is falling, it’s better to sit in cash and wait for the lowest price possible.
Changes in interest rates also sometimes overlap with inflation and inflation expectations.
That can lead to big moves in hedge assets like gold. And some see cryptocurrencies as a potential hedge from other asset classes. However, the space hasn’t really existed during a period of sustained higher interest rates like in decades past.
Overall, investors should be cautious, look for opportunities, and look for stocks that can perform well during periods of high inflation and try to buy at the best price possible.
For the full video going over the implications of higher inflation rates, click here.