Interest Rates Are Going To Go Higher

Even while the Russian-Ukraine conflict continues to rage on, the fact of the matter is the US, and honestly, the majority of the world is dealing with higher-than-expected inflation. And the most direct way to bring that inflation back down to sustainable levels is for the Federal Reserve and other central banks around the world to take action and increase interest rates.

Prior to the Russian-Ukraine situation occurring, it was widely expected that the Federal Reserve would raise the benchmark interest rate by 0.5% in March. However, now that the war in Ukraine is occurring, many believe the Fed will only increase rates to 0.25% in March and reassess the situation at the following meeting.

However, even while most market participants expect a rate hike of just 0.25%, some Fed officials still believe that a 1.00% rate hike is justified in March. While there is talk of the 1% hike, very few believe it will occur in March, especially since the Russia-Ukraine situation.

Furthermore, market participants also need to consider when and how quickly the Federal Reserve decides to start winding down its balance sheet. Some believe when the Fed begins that process, it could have more of an effect on interest rates than when the Fed actually raises rates since the Fed was a huge buyer of bonds. Since the bond market and bond interest rates are essentially determined by supply and demand, if demand is weak due to limited buyers, the interest rates will increase until buyers step in. With the Fed no longer buying and potentially selling bonds, supply will be high, which will require much more attractive yields in order to entice investors to step in and buy bonds.

So as an investor, how can you profit from this information? Continue reading "Interest Rates Are Going To Go Higher"

Oil And Gas ETFs Are Headed Higher

When the Coivd-19 Pandemic began, the oil and gas industry went into the tank as demand for oil came to an abrupt halt. Around the world, air travel and domestic passenger vehicle travel were essentially non-existent when governments around the world implemented travel restrictions and lock-downs to slow the spread of the virus. Once stay-at-home orders were lifted, demand began to creep higher for oil, but since the airline industries consume a large percentage of global oil demand, for the bulk of 2020, oil prices and demand were still well off their normal levels.

As we moved further into the pandemic and passenger vehicle travel began to increase, airline and even the cruise line industry came back online, demand for gasoline quickly rose. At the start of 2022, demand was once again strong, and as the Omicron variant peeked in January, oil began flirting with $100 a barrel oil prices in the US, a level not seen since 2014.

Just a month or so later, the oil industry seems to be going through another significant change due to the Russian-Ukraine situation. Due to Russia being one of the largest oil and gas producers globally and countries around the world implementing sanctions against Russia, supply for the commodity appears to be a significant issue moving forward.

Most of Europe relies on imported Russian oil and gas. However, the longer the war in Ukraine continues, there is ever-increasing likelihood that Russian oil and gas may not Continue reading "Oil And Gas ETFs Are Headed Higher"

Gold, Should You Own It In 2022

As we continue to roll into the new year and the market volatility appears only to be strengthening by the day, you may be wondering if gold is worth investing in during these turbulent times.

Well, the real question maybe is why are the markets so turbulent today? There are a few reasons, of course, but the big reason is because of the coming higher interest rates and deleveraging of the Federal Reserves balance sheet. But, the why behind the higher interest rates is what's very appealing to some gold investors today; high inflation.

Gold has forever been the hedge against high inflation. The thinking is that the dollar losses value as inflation goes higher, but it will continue to keep up with inflation, and historically it has pretty well. So, the Fed is currently talking about raising interest rates in the coming month in an attempt to slow inflation but not derail the economic recovery due to the negative effects caused by the Covid-19 pandemic.

So, we know that gold is good when there is high inflation, but do we know if it's good when interest rates are rising? Continue reading "Gold, Should You Own It In 2022"

REITs May Be Great Investment Moving Forward

Real estate has historically been a great investment during times of high inflation. And in certain ways, it’s also a good investment to be holding during times of high-interest rates. Just a month or so ago, the US saw inflation at over 7%. And during the Federal Reserve meeting in January, Jerome Powell made it very clear that interest rates would be rising in the near term. So, what are you waiting for?

Ok, before you go off buying, let me dig a little deeper into why real estate and REITs are good during times of inflation and high-interest rates. For the most part, REITs will perform well during periods of high inflation because while goods and services are increasing in price, so will real estate because the price to build new homes will have risen due to inflation.

Think about what we just saw over the last two years with residential real estate in the US. Lumber, metal, plastic, concrete prices all increased due to the pandemic supply chain issues. Thus, the cost to build a brand-new home also went higher. If the price to buy brand new goes higher, then the price of pre-owned homes can also go higher simply because of the laws of supply and demand. And if the price of building a new home or buying a pre-owned homes goes higher, rent prices can also go higher. Continue reading "REITs May Be Great Investment Moving Forward"

This Is Not The Time To Panic

Almost the worst January in history! The streets are red, and everything looks like doom and gloom. Your account is off its highs, and nearly every day you log in to see what stock and ETF prices are doing, it only gets worse. The Federal Reserve is telling us they will raise interest rates all while inflation is higher than they expected it to be. It's hard to see what will stop the pain anytime soon, despite the occasional rally, green day.

However, this is not the time to panic.

Unless you started investing in the summer of 2020, you have seen this before. And unless you plan to stop investing, you will see this again in the future once this round of pain subsides.

First though, let me remind you where we came from and why in reality, this is not nearly as bad as it feels today. On February 10th, 2020, the S&P 500 was at 3,380; This was the top of the market before the Covid-19 pandemic started being felt by market participants. The bottom came about a month later, on March 16th, 2020, at 2,304. That is a 31% drop. Continue reading "This Is Not The Time To Panic"