Three Reasons Why You Shouldn’t Sell Your Gold
Interest rates could soon take off.
If we wrote this a few months ago, you might have thought we were crazy. That’s because the Federal Reserve’s done everything it can to avoid raising interest rates this year.
In March, it didn’t raise rates because of a bad jobs report. In June, it held off due to concerns about the global economy and “market volatility.” In September, it didn’t raise rates because it’s waiting for the job market to improve.
These are legitimate reasons to not raise rates…but the Fed also held off for another reason: the presidential election.
You see, the Fed has held its key rate near zero since 2008. This made it incredibly cheap for households and businesses to borrow money. In many ways, the economy is now hooked on cheap money.
At this point, the Fed could trigger a financial crisis or recession by raising rates. And that’s the last thing it wanted to do before the election.
• With the election behind us, most people think the Fed will finally raise its key rate next month…
To be fair, most investors have been preparing for a December rate hike since the summer. But now that Trump’s going to be president, it looks like rates could rise faster than people expected.
You see, most people thought the Fed would raise rates slowly if Hillary won. But Trump has a much different plan for America.
He wants to grow the economy using fiscal stimulus, which basically means government spending. Specifically, he wants to spend hundreds of billions fixing the country’s infrastructure.
According to Bloomberg, Trump’s policy could force the Fed to jack up rates quicker than they would have under Hillary:
“We do view the election of Donald Trump as a game changer,” said Adam Donaldson, head of debt research at Sydney-based Commonwealth Bank of Australia. “The strong bias toward fiscal expansion and inflationary policy represents a stark change to the malaise of recent years. This opens the door for the Fed to hike in December, but also more quickly in 2017 and 2018 than previously expected.”
• This is a HUGE deal…
You see, interest rates aren’t some arbitrary number. They’re the price of money. A big move in interest rates affects everything from stocks to commodities.