To Raise or Not To Raise…That Is the Question

The Fed did not raise interest rates at their September meeting. They will meet again in November, but with the proximity to the national election, they are unlikely to raise rates at that time. However, the odds are rising that they will take action at the December meeting.

There are many divergent opinions on this matter. However, we believe it is time for slow and steady rate increases; time for the Fed to keep moving on rates, as they started to do at end of 2015. Inflation is continuing to slowly creep up, and we would prefer to see them move short term rates up several more times in 2017 - should economic conditions improve, even if very gradually.

Interest rates are still near record lows, and we believe the financial markets and the economy can handle slightly higher interest rates. Rather than being a negative, it would indicate to us that the economy is on a solid foundation, and that a recession is not lurking in the short term horizon.

The markets, especially stocks, might have a "knee jerk" reaction at the beginning of this trend toward higher rates. But we agree with our Market Strategist, Jeff Saut, in which the stock market is in the middle of a very long period of rising prices. In addition, if this policy of rising rates is done slowly, and carefully, that the financial markets can handle it.

We review with clients how interest rates may impact the stocks and particularly the bonds in their portfolios when we have our annual reviews in person or by phone. Should you have questions in the interim, or if you are not a current client, please give us a call to discuss. Team line: 727-567-7333.

Views expressed are not necessarily those of Raymond James & Associates and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success.