By Bryan Rich
October 4, 5:00 pm EST
For perspective, the Fed has now moved 8 times off of zero. The leaves the benchmark (short term) rate set by the Fed at 2-2.25%, still well below long-term average rates. And that leaves the market determined (longer term) interest rate, just below 3.25%, still well below the long-term average. With that, rates are still low. In fact, if we took the record low in the 10-year yield, set in July of 2016, and applied the Fed’s 200 basis points of hikes, we would have a 10-year of 3.34%. We are still south of that. I would argue at current levels, the interest rate market is finally pricing in sustainable economic recovery (pricing out risks of another post-economic crisis shock/slump).
Now, when rates are on the move, people immediately start talking about debt service. On that note, consumers and companies are in as good a financial position as they’ve been in a very long time (record high household net worth, record profits) . Household debt service ratios are at record lows.
Bottom line, the move in rates is a growth story, not a crisis story. We have 3%+ economic growth, with low inflation and solid employment. We may have finally returned to the level of trust and confidence in the economy that fuels “animal spirits.”
Attention loyal readers: The Billionaire’s Portfolio is my premium advisory service. And I’d like to invite you to join today, as we are beginning what I think will be a tremendous run for value stocks into the end of the year. It’s a great deal for the money. Just click here to subscribe, and get immediate access to my full portfolio of billionaire-owned stocks. When you join, you’ll get immediate access to every recommendation–past, present and future–in the portfolio. And I’ll deliver my in-depth notes on our portfolio and the bigger picture every week, directly to your inbox.