• Home
  • Careers
  • Our Approach
  • Who We Help
    • Individuals
    • Couples
    • Energy Sector Employees & Retirees
      • Occidental Petroleum (Oxy) Employees
      • Shell (RDS) Employees
  • Library
    • Financial Blog
    • In The Press
    • Articles
  • Client Login
  • About Us
  • Contact Us

The Goff Financial Group

Fee Only Financial Advisors

  • Home
  • Careers
  • Our Approach
  • Who We Help
    • Individuals
    • Couples
    • Energy Sector Employees & Retirees
      • Occidental Petroleum (Oxy) Employees
      • Shell (RDS) Employees
  • Library
    • Financial Blog
    • In The Press
    • Articles
  • Client Login
  • About Us
  • Contact Us

The Federal Reserve’s Impact on Your Portfolio

June 3, 2015 by Matthew Goff 12 Comments

Federal ReserveChanges in interest rates have a disproportionate effect on your portfolio. Lower interest rates can help boost corporate earnings, and as earnings increase, market prices often do too. This is a key reason why stocks frequently increase in value as interest rates fall. Another reason is that lower interest rates drive investors to seek higher yields on their funds, thus increasing the demand for stocks.

One of the best ways I have ever seen to fully understand the influence of interest rates on your portfolio is to think of them as “financial gravity”. The lower rates are, the more likely stock prices will float higher. The higher they are, the more gravitational pull they exert on prices.

Since interest rates have such a critical impact on asset prices and corporate earnings, policy decisions by the Federal Reserve to influence interest rates have a significant impact on the value of your portfolio. The Federal Reserve’s willingness, for example, to take long-term interest rates down to historical lows has significantly influenced market prices and the value of your portfolio. The Federal Reserve has done this by pursuing a policy of rapidly expanding their balance sheet—by trillions of dollars—to purchase long-term debt instruments. These asset purchases have created an artificial demand for long-term debt instruments, which has the net effect of lowering rates. Such actions stimulate demand by keeping interest rates low for consumers and businesses to borrow, consume, and invest. One of the many side effects of this policy, including possible higher inflation, is that it punishes savers via low interest rates on their funds, and benefits spenders who borrow and consume.

Looking back on the effects of the Federal Reserve’s decision to keep rates low, we can see a rapid expansion in prices across a variety of asset classes including stocks, bonds, and real estate, as investors seek higher yields on their savings. While the outcome of these actions is somewhat predictable (lower interest rates often increase asset prices), the timing and scale of such price appreciation is not. In recent years, there have been significant swings in market prices due primarily to short-term speculation on what the Federal Reserve would or would not do to stimulate the economy. This leaves the pressing question still hanging overhead of what will happen to market prices when the Federal Reserve reverses course. If the market responds adversely, which is highly likely, there may be a significant number of buying opportunities for your portfolio.

Filed Under: Federal Reserve, Financial Markets, Fixed Income, Interest Rates, Investing Tagged With: Interest Rates

Trackbacks

  1. Reliant Energy Plans says:
    December 8, 2021 at 5:21 pm

    … [Trackback]

    […] Here you can find 35436 additional Info to that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  2. บาคาร่า1688 says:
    December 17, 2021 at 5:36 pm

    … [Trackback]

    […] Information on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  3. car dealership surveillance says:
    January 3, 2022 at 6:32 pm

    … [Trackback]

    […] Read More on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  4. check here says:
    January 6, 2022 at 4:51 am

    … [Trackback]

    […] Read More Information here on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  5. kardinal stick says:
    February 8, 2022 at 7:34 pm

    … [Trackback]

    […] Find More on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  6. สล็อตวอเลท ไม่มีขั้นต่ำ says:
    March 3, 2022 at 7:52 pm

    … [Trackback]

    […] Read More here on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  7. คาสิโนออนไลน์เว็บตรง says:
    March 5, 2022 at 1:37 am

    … [Trackback]

    […] Read More to that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  8. USA Gun Shops says:
    March 18, 2022 at 7:05 pm

    … [Trackback]

    […] Find More Info here on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  9. relx says:
    March 30, 2022 at 6:12 pm

    … [Trackback]

    […] Read More to that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  10. https://www.famka.co.za/collections/test-kits says:
    April 21, 2022 at 5:34 pm

    … [Trackback]

    […] Info on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  11. sbo says:
    April 30, 2022 at 6:25 pm

    … [Trackback]

    […] Find More on to that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

  12. pgslot99th says:
    April 30, 2022 at 8:02 pm

    … [Trackback]

    […] Here you can find 73991 more Information on that Topic: gofffinancial.com/the-federal-reserves-impact-on-your-portfolio/ […]

Leave a Reply

You must be logged in to post a comment.

Recent Posts

  • How To Select A Financial Advisor
  • Sequence of Returns Risk
  • Learning from Biases and How They Affect Our Financial Choices
  • Tuning Out the Noise from the Financial Media
  • Spotlight Shift to Bonds
  • Should You Consider Refinancing Your Mortgage?
  • What Are Stock Splits?
  • Small Business Retirement Plans
  • Why You Might Want to Create a Donor-Advised Fund
  • Are Your Beneficiary Designations Up to Date?
[contact-form-7 id="340" title="Footer Contact"]


The Goff Financial Group
11 Greenway Plaza, Suite 1425
Houston, Texas 77046

Copyright © 2022 The Goff Financial Group

ADV Part II | Form CRS | Careers | Q&A

Tel: 713.850.8900

Fax: 713.728.4884


The Goff Financial Group © is an independent, fee-only investment advisor registered with the U.S. Securities and Exchange Commission.

Navigation
  • Home
  • Careers
  • Our Approach
  • Who We Help
    • Individuals
    • Couples
    • Energy Sector Employees & Retirees
      • Occidental Petroleum (Oxy) Employees
      • Shell (RDS) Employees
  • Library
    • Financial Blog
    • In The Press
    • Articles
  • Client Login
  • About Us
  • Contact Us

Complete the form below and we will send you the checklist before our call

Scheduling Options:*
Please choose from one of the options below
First and Last Name*
Hidden
In What Areas Do you Need Assistance?
Select All That Apply

Find Out If An Independent Advisor Is Right For You

"*" indicates required fields

First and Last Name*
In What Areas Do you Need Assistance?
Select All That Apply

Mail my free book to the following address. (No P.O Box)

  • Hidden
  • Hidden
  • Hidden
  • Hidden
  • What is your top concern today?

Kick-Start Your New Work-Free Life!

The 3 Pillars of Successful Retirement Plans
  • This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.