All eyes will be on the Federal Reserve this week

by | 19 Mar, 2018

 

The biggest story in markets this week is likely to be the Federal Reserve meeting Wednesday – the official debut for new Fed Chair Jerome Powell (above). The Fed is broadly expected to raise interest rates to 1.75 percent from 1.5 percent, in the first rate hike for 2018.

It doesn’t sound like a lot, but every time the Fed hikes rates it has an impact on the global financial markets.

Higher interest rates mean banks are charged more to borrow from the Fed, but this can be a boon for investors in bank stocks, because the banks then charge their customers more to borrow money, which improves the profits they make on loans, pumping up their share prices. However, it also means businesses are charged more on loans and subsequently have higher debt expenses, which can negatively affect their bottom line (profits).

Global stock markets have gotten used to low interest rates ever since the financial crisis, and now rate levels are returning to ‘normal’, we may see a gradual slowdown in equity markets as the era of ‘easy money’ comes to an end alongside a rollback of QE (quantitative easing).

Jerome Powell has taken over the post of Fed Chair over at a delicate moment. He will have to finish the job that his predecessor (Janet Yellen) started – rolling back the extraordinary measures taken after the financial crisis, without causing a relapse. With US economic growth moving up at a pretty rapid clip, the Fed is the central bank that is spearheading this move back to a more ‘normal’ economic environment. This is going to be tricky enough by itself, let alone the fact his boss (Trump) has just added a substantial stimulus to the economy through the Republican tax bill.

Investors will be closely watching on Wednesday to see whether Powell shifts expectations of future rate hikes. Will the Fed hike faster for example? Time will tell, though given Powell has been referred to as “annoyingly normal” by friends, according to the Washington Post, it’s likely he will want to maintain a more gradual approach to monetary policy, inkeeping with Yellen before him. The big question is how many times they will hike. 3 is expected, but it could be 2 or 4, depending on the Fed’s outlook. 

Want to learn more about the markets and how to become a better investor?

Download the Invstr App now.

Avengers Crushes Box-Office Records

All emails include an unsubscribe link. You can opt-out at any time. ​See our privacy policy.

ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.

Download on the App Store           Download on Google Play

ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.

 

Share This