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The Federal Reserve Raises Interest Rates


December 16th, 2015 03:06 PM

The Federal Reserve Raises Interest Rates
The inevitable has finally happened and Wall Street investors seem to be at ease for the moment. Today, Janet Yellen the Federal reserve Chair, raised interest rates for the first time in 9 years to 0.25% from 0%.

Stocks reacted positively to the news but not without many concerns. The top concern among investors and the Fed is the effect the interest rate hike will have on emerging markets. The Fed signaled they will be watching this very closely so they can keep our market stable.

Others areas are leaving investors a little concerned like the Junk Bond market. Could drying liquidity fears become increasingly amplified by the new interest rate hike?

As soon as the announcement was made, Wells Fargo followed by JP Morgan raised prime loan interest rates to 3.50% from 3.25%. Auto sales have been good with 0% interest rates and now future earnings for the auto industry are in question.

As for 2016, the Fed will most likely raise rates between 1 and 4 times, each likely being a 0.25%. Many are speculating already that the FED won’t make it past its first interest rate hike next year without causing more financial quagmires as a result.

So for today, stocks rallied, but we will have to give it a few days, if not weeks to see what type of effect, if any, the interest rate hike will actually have an effect on our economy as a whole.

As for the near future it looks like more market volatility ahead. Even though Janet spiked the proverbial football, it just doesn't feel right.

The truth is, she was forced to raise rates because of the Feds hesitation in September. Janet can think what she wants about the anemic strength of our economy. But lets ask ourselves?

 If the economy is so good, why is the price of every commodity out there so terrible? If the economy is so good, why do junk bonds continue to fall? If the economy is so good, why is there recurring talks of a global recession.

The Fed will do whatever investors want till either it all comes crumbling down, or till the 2016 election is won by Democrats.

I think we can all see that the political powers are still at play. 

 

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About Dr. Ron Caskey

Dr. Caskey has over 30 years experience as a trusted financial professional. Over the past three decades, he has helped scores of valued clients create, protect, and distribute wealth in an effort to greatly enhance their overall quality of life. He lives with his wife Jeannine in Firestone, Colorado. They have raised 5 kids and have 11 grandkids.

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*Disclaimer* - *Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Bonus annuities may include higher surrender charges, longer surrender periods, lower caps, higher spreads, or other restrictions that are not included in similar annuities that don’t offer a bonus. By responding you may be contacted by an insurance agent. Annuities are designed to meet long-term needs for retirement income. They provide guarantees against the loss of principal and credited interest, and the reassurance of a death benefit for beneficiaries. This website and its contents, downloads, videos and audio files are designed to provide general information on the subjects covered and is provided to you for informational purposes only. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Ron Caskey does not give legal or tax advice. Please consult your tax advisor or attorney. Ron Caskey is a registered and licensed insurance agent resident in the state of Colorado, non resident in multiple other states. This website focuses on insurance products in an attempt to avoid volatility. The term "Safe Money" should not be understood as signifying a guarantee or a guaranteed investment.*
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