Low interest rates have many impacts on our investment:
* Usually they're better for the stock market as corporations can borrow at cheaper rates and hence improve the bottom line. It should be great for the housing market and retailers.
However, prolonged period of low interest rate will damage the economy. Japan is one example.
* Bonds will suffer big time.
* Dividend stocks will prosper from bonds moving to stocks.
* Folks depending on fix incomes will suffer.
The government has to adjust the rate to stimulate business by lowering the interest rate but at the same time not to prolong it too long.
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(c) TonyP4 2012. Written in 4/24/12. Last updated in 4/24/12.
Disclaimer:
Do not gamble your money you cannot afford to lose. Past performance is a guideline and does not guarantee future performance.
All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
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We're in the early stage of prolonged period of low interest rate, so I agree that it will not be very helpful now.
ReplyDeleteThe conventional wisdom is low interest rate stimulates business and that in turn increases jobs and that in turn generates taxes. When we print money at the max, this is what happens.
Our government wants to buy votes and the voters do not want to bite the bullet. Our recovery takes for ever now and hopefully will not head to the same path of Japan. Sometimes no government effort could be the best effort to let business take care of itself naturally.