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No matter where you turn these days, news broadcasters, financial pundits and market watchers are talking about the Federal Reserve and what they will do with interest rates. Will they continue to increase rates or become more accommodative and slow down their increases? Since the 2008 financial crisis, the Fed has raised rates eight times (once in 2015, once in 2016, three times in 2017 and, so far, three times in 2018). What will happen next?
What many investors fail to recognize in the current financial environment is the silver lining that comes with rate hikes. The Fed ups the interest rates to avoid an over-heated economy. The objective is an economy where financial and labor markets are performing well, and there is robust spending on the part of businesses and consumers. When the pundits expect these positive trends to continue and start to worry about inflation, look for the conversation predicting a Fed rate hike to pick up.