The economy seems to be recovered… at least when you look at the stock market, I mean the S&P is much higher than before it dropped in February of 2020. Sadly, the stock market doesn’t always indicate how the economy is doing, and as of late that couldn’t be truer. The pandemic affected everything from stocks to homes, to stores, but the one thing that was arguably the most affected in the economy was jobs.
One thing the federal government has been doing is keeping interest rates low in hopes to encourage borrowing and restimulate the economy and kick employment back to life. In fact, the government has even set out some goals they hope to achieve.
Unfortunately, the most recent goal to improve the economy (which was supposed to be met by the end of June) was not met. On top of this, at a recent meeting in mid-June, the Feds moved towards a post-pandemic view of the world, leaving the longstanding idea that covid is a constraint on the economy. Because of this, many investors feared the interest rate would rise much too fast and not give the economy – still struggling with high levels of unemployment and rising inflation – enough time to recover.
This increased skepticism and decreased confidence in the long-term outlook in the economy is reflected in the relationship between Long and short-term Treasury yields because the gap between them has been narrowing, an empirical sign of these sentiments. Despite this, however, the Fed claims they won’t be raising interest rates anytime soon. What do you think about the feds claim? And do you think interest rates will remain close to zero?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.