The Market Is Going Negative
Treasury Yield have been rising and the stock market has been dropping – here’s what this means, how you should invest your money, and the entire impact on Real Estate – Enjoy! Add me on Instagram: GPStephan
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This is how much the US Government will pay YOU, if loan them money. So many investors are buying up SHORT TERM US TREASURIES, that they’re driving down the yield to the point where, very soon, investors would rather GET A NEGATIVE INTEREST RATE ON THEIR MONEY, simply because they believe that’s the safest place for it to be….IN THE SHORT TERM.
Long term, however – it’s a different story. The benchmark that most institutions look at when determining how much THEY will CHARGE YOU in interest is the 10-year treasury yield, because this gives a much longer timeframe in terms of how our economy might be doing…and lately, those yields have been going UP.
This means that fewer and fewer investors are buying the 10-year bond, which causes the effective interest here rate to go UP…and the higher this number goes, the higher OTHER interest rates need to be to remain competitive. This means, NOW…the general consensus is that there’s a high likelihood that interest rates are finally going to start to creep back up, which means the cost of borrowing money gets more expensive, which means growth might finally begin to slow down…and that’s a concern.
Now, even though it might SEEM like a giant concern that household debt is at its highest level ever…I actually see it as a quite reasonable response to REALLY, REALLY low interest rates…and, it makes sense that people are taking advantage of this.
Obviously, this CAN be risky if you’re pulling out money and speculating on meme stocks…but, for the level-headed, practical investor – refinancing a mortgage, and investing back in the stock market throughout one of the fastest drops we’ve seen, is a fairly REASONABLE approach, all things considered.
WHAT THIS MEANS FOR THE STOCK MARKET:
I wanted to know – do rising interest rates lower stock prices? Well, the surprising answer is…sometimes it does, but not every time. Historically…throughout the 1980’s and 1990’s, interest rates went up, but so did the stock market. Rates then plummeted after the dot com bubble, and stocks kept falling, even as the interest rate continued going down. Then throughout the mid 2000’s…interest rates went up alongside stocks until 2009, when rates have stayed fairly low ever since.
The takeaway is that SO MANY OTHER FACTORS influence the stock market OTHER THAN just interest rates. Instead, IF we see a drop, that’s a good reminder to stay diversified, keep buying in, keep holding, and no matter what happens – diamond hand your long term investments.
WHAT THIS MEANS FOR REAL ESTATE:
As far as whether or not rising interest rates impact real estate values – it’s difficult to say. The simple answer is, YES – rising rates do affect the affordability of homes, but other factors – like, inflation, supply and demand, and the local economy make just as much of a difference, as well.
If you’re a LONG TERM INVESTOR, meaning – you don’t need this money for the next 10-20 years, which should probably be most of you watching if you’re under the age of 40 years old…then whatever happens in the short term doesn’t matter much, and you should keep buying as usual. If we see a drop, don’t panic – keep buying – and and leave it be.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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