Where Are U.S. Interest Rates Going and Why?
September 10, 2019 - Season 1, Episode 2
In this episode, Chris Abely talks about the direction of U.S. Interest Rates and how to combat the effects of declining rates.
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Welcome to CTMA's podcast. I'm your host, Scott Albraccio. Here's an opportunity for us to update you on current market trends and conditions, and issues you should be considering when investing into your 401k, wealth management plan, or pre-funding.
Chris Abely, CFA:
U.S. interest rates look like they're headed back to zero. Why is that? And how can you manage that with your own portfolios and your own assets? Well, one of the reasons appears to be that there's too much capital in the world. And what does that mean? There's basically too much money in the world, and there's not a return for it. If you go to the overseas countries, you're finding that Portugal, Italy, Germany are issuing their bonds either below zero or close to zero with all-time lows. U.S. interest rates are probably headed there. That means that buying things that will pay you yield is probably a very good thing at this point. That means that you need to lower your expectations for what your returns are going to be. That means that you have to be aware that savings are more important than ever. That means that you understand that bubbles occur when interest rates and money is cheap.
Chris Abely, CFA:
Money and interest rates have never been cheaper, which makes a suggestion that many asset prices may be inflated. Do we believe that? Yes. Do we think there's a way to manage around that? Absolutely. Do we understand that it's important for our clients and potential clients to understand how are we managing that? Absolutely. Preferred stocks, high capitalization, dividend-paying companies, non-U.S. companies paying us to own them with yield and dividends, and other assets that are going to give us a return, that's going to pay us to own them. Interest rates are headed lower. It's important that you manage now for that outcome. That's where we are at this point in the business cycle. That's where we believe.
Scott Albraccio, CTMA:
Thank you for listening to our podcast. I hope you found that informative. Don't forget to subscribe to our channel and never miss an episode.