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New era for interest rates? …..L.A. Times article provides a good overview of current
outlook for interest rates, summarizing many of the key arguments and factors.
Their conclusion appears to be that despite ongoing concerns, interest rates
will stay low for longer than many now believe.
What’s the
point? There is raging debate
currently about the secular outlook for interest rates: will they remain low or
return to more normal levels of the past. As of now, we believe the
preponderance of forces remain on the side of subdued inflation and low interest
rates for an extended period. Why? To name a few reasons: global age
demographics, global competition, technology advancements, restrained wage
gains, restrained hiring of full-time employees, de-leveraging consumer leading
to lower growth in consumer spending, tighter consumer credit, extended period
of low monetary velocity. These are among many factors that the Fed monitors.
Currently the Fed is not concerned about a return to damaging inflation and, we
believe, would welcome a somewhat higher level of inflation presumably because
it would reflect a strengthening economy. If rates do continue to remain low,
as we expect, we believe this would support increased investor interest in high
quality dividend-paying stocks which, in turn, would be positive for stocks in
the longer term. Link: http://www.latimes.com/business/la-fi-interest-rates-20140706-story.html#page=2
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