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5 reasons not to be afraid of rising rates and falling stock prices


Stories of rising interest rates and falling confidence tell us a lot about how confusing the rates of inflation, recession, job losses and stock market crashes can be. Economists are now worried about what may be an excessive call for rising interest rates and inflation, which is hard to beat, and their concerns are being passed on to consumers and, no doubt, business owners through the media.

Of course, this is the task of the media – to report on what experts such as economists say – but sometimes there can be excessive concern on one side of the dispute or history.

It came to me this morning at 5.30 when I was watching American Business Television CNBC and pedaling on my Nordictrack exercise bike, which is a local business success story I would like to tell you about one day.

At the time, Spiro, my colleague with 2GB, wrote me a message that breakfast host Ben Fordham wants to talk about the drop in consumer confidence. SMH report by Shane Wright.

Cleverly, Ben linked the last reading of consumers and their confidence with a big event on Saturday – the federal election.

And while there were many headline issues during the campaign, the cost of living and the expectation of rising interest rates underlie many conversations about voting from politicians on hosting.

Interestingly, Shane revealed that the RBA protocols state that the Council is considering raising the interest rate by 0.4%, which would be a shock to those who have loans, and, I would say, also to the Morrison government.

This news makes 0.25% growth much more digestible!

And what is on the minds of those voters who have loans – is that there are new increases in interest rates, because inflation has not yet been able to reduce. In fact, some economists believe the cash rate could be 1.5% by the end of the year, and some say 2% or 3% over 12 months!

It will crush those who have debt, and I believe it will lead to a recession, and I cannot believe that future inflation deserves such growth. I also don’t think the RBA is that stupid!

This is my best guess, but I know that Matt Comin of the CBA is in my camp, predicting a much smaller rate increase. Here is what James Ayers of AFR wrote last week: “Commonwealth Bank of Australia CEO Matt Comin says homeowners may be overly worried about interest rates rising over the next 12 months because he is confident in the bank’s forecasts that the current rate will grow only to half the level projected by the market. “

The Central Bank emphasizes the cash rate to only 1.35% this year and 1.6% next year. Exciting people in the bond market have a cash rate of 2.5% by the end of 2022 and 3% plus by next year!

With stories like this, why not give away consumer confidence? Here’s what Craig James of CommSec told us yesterday: “The ANZ-Roy Morgan Consumer Confidence Index fell 1.3% last week to 89.3 points (the long-term average since 1990 is 112.4). This was the fourth consecutive decline in confidence in a week. “

By the way, in the short term this could get worse if next month Bill Evans of Westpac rises 0.4%, up 0.75%, which will add $ 172 to the monthly mortgage payments of $ 800,000.

And if they do, confidence will fall sharply, and I believe that wage data today may determine what will ultimately increase the RBA rate on June 7.

In the short term, I don’t see any positive news to break out of this current negative. Other stories I’ve come across while pedaling (and you’re probably asleep!) Make me think that bad things about inflation, interest rates, and very negative stock markets can change quickly.

Overnight, US stock markets were very positive: the Dow rose 431 points (or 1.3%), the S&P 500 rose 2.02% and the Nasdaq 2.76%, and there is a feeling that many in the US stock markets believe that the sale of shares was excessive, and perhaps it is time to highlight too negative a story about interest rates.

“Our contributions today support the momentum we saw on Friday and continue it,” said Art Hogan, National Securities ’chief market strategist. “But the most important thing for investors is that you’ve reached a point where you’ve appreciated a lot of the worst-case scenarios.” (CNBC)

It’s too early to call the stock sale over, but the best news is leaking. How? Try this:

1. The Fed has ruled out a 0.75% increase in interest rates.

2. Goldman Sachs Chief Bond Officer Jonathan Fine believes the bond market is easing fears that interest rates are rising rapidly.

3. China believes that the blockade will end in June.

4. Fears of a recession are diminishing in the United States.

5. The latest number of jobs in the US has shown a slowdown in wage growth.

What an expert CNBC reminded me of the strength of consumer balances due to government payments and how blocking has reduced our costs. As with Americans, our personal balances are much stronger than ever.

Obviously, we have $ 270 billion in savings in our bank accounts, which will help many of us cope with rising interest rates.

In addition, many Australians do not have housing loans, and retirees will save more with rising rates.

I believe that over the next few months confidence will rise, inflation will start to fall in a few months of further growth, interest rate forecasts will be lowered, the stock market will like this news, and confidence will start at pennies and head up.

Yesterday I wrote that now investing in stocks is for the brave, but there are some positive signs of development, as I showed above.

Interestingly, the Russell 2000 index examines U.S. small-cap companies, and it is beginning to outperform large-cap companies, which may be a good sign for stocks.

Russell 2000 (RUT)

The Dow rose 4.17%, the S&P 500 rose 5.4% last month, and Russell rose 7.4% – and I hope this trend continues.

To turn this market growth into a steady trend, many good things need to happen, but one report may be that stock market sell-offs and fears about interest rates have been more negative than they should have been.

If China manages to avoid a blockade and the war in Ukraine can end as soon as possible, you will see how right my restrained optimism will be, but I admit that there are several “ifs” and “buts” in my story.

And I guess if I’m wrong, many of you may say, “Bike, doorman!”


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