Why Have Long Term US Interest Rates Moved Lower?

Many people have asked, if the US Economy is growing then why haven't longer term interest rates gone up?  The chart above helps to answer that question.  If you are looking to invest in safe assets around the world the US Treasury is very attractive.  If I gave you a choice which bond would you rather buy?  A US Treasury at 2.00% (currently) or the German Bund at 0.50%?  Most people believe that the value of the US Dollar will continue to increase versus other currencies.  Which makes owning the US Treasury even more attractive.

As long as this situation continues, I think that US Interest rates will remain low for longer.  The good news is that this does provide a benefit to the US economy.  Mortgage rates remain low,  and companies can continue to issue debt at low levels.

Market Volatility

Per my past emails, I had mentioned that I felt that we were entering into a new period for the markets with increased volatility.  This has certainly come to fruition.

Recent concerns have centered on the weakness in Russia, the European Union and the Emerging Markets.  The stock market has been primarily trading based on the direction of oil.  The concern is that there is both substantial global weakness (a lack of demand) and too much supply in the market.  Lower oil prices are a benefit to the US consumer and the economy, but may put pressure on the Stock Market in the short term.

Yesterday, the Federal Reserve (in their statements) moved but kept the phrase "considerable time".  The reaction was a significant rise in the market based on the Fed’s continuing accommodative stance.

The most important point is that although short term volatility in the stock market will continue, it will not have an impact on how we position your portfolios.

The Rise of the Rich Man's Subprime

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The Rise of the Rich Man's Subprime