Personal Finance

How long is the current interest rate sustainable?

  • Last Updated:
  • Oct 3rd, 2014 10:59 am
Tags:
None
Deal Fanatic
User avatar
Dec 14, 2010
5490 posts
5719 upvotes
RichardJohnson321 wrote:
Sep 13th, 2014 5:31 am
When interest rates rise, that is bad for economic activity and bad for stocks. That is why so many stock analysts are alarmed that interest rates are going up so rapidly right now.
Not necessairly. A gradual rise in interest rates (not a spike) would be bullish for the market as long as economic conditions continue to strengthen. Companies are doing well, and stock prices will follow earnings.

The market has a few reasons to correct for the next 2 months (FOMC statement on Wednesday, HMOs announcing premium hikes and debt ceiling). I expect the market to correct between 10% to 20% based on the combination of these factors. By November it should rally to new highs again, towards end of year.

This should create a good buying opportunity for stocks.

Rod
Banned
Jan 11, 2004
19816 posts
560 upvotes
For Canada its not going up anytime soon...the US probably will go up soon but not here

Not sure why people on here think we need to move with the us on rates...our gov and boc wants loonie lower and our economy is tanking compared to the US..why would we match US rate hikes?
Deal Addict
User avatar
Feb 25, 2014
2170 posts
338 upvotes
Mississauga
If interest rate rises, gradual or spike, our economy will crash because it is debt ridden economy. Our investments are highly leveraged including housing and stock market. We do not have any source of foreign income other than selling oil and gas.
Oh sada kehra bapu karda black nee, Jehra tere shahir (Toronto), Le lawan flat nee
Deal Fanatic
Mar 24, 2008
5717 posts
1830 upvotes
Toronto
rodbarc wrote:
Sep 13th, 2014 8:27 am
Not necessairly. A gradual rise in interest rates (not a spike) would be bullish for the market as long as economic conditions continue to strengthen. Companies are doing well, and stock prices will follow earnings.

The market has a few reasons to correct for the next 2 months (FOMC statement on Wednesday, HMOs announcing premium hikes and debt ceiling). I expect the market to correct between 10% to 20% based on the combination of these factors. By November it should rally to new highs again, towards end of year.


This should create a good buying opportunity for stocks.

Rod
Quoted for posterity and to rub it in your face is stocks don't correct 10-20% in the next 8 weeks. I hope you are not betting the farm on your prediction/expectation/fortune telling. :lol:
Deal Fanatic
User avatar
Dec 14, 2010
5490 posts
5719 upvotes
ksgill wrote:
Sep 13th, 2014 9:02 am
Quoted for posterity and to rub it in your face is stocks don't correct 10-20% in the next 8 weeks. I hope you are not betting the farm on your prediction. :lol:
Markets are irrational, it doesn't have to correct. These are potential triggers (reasons to correct). My point was not to predict the market, but to show that a drop due to interest rate increase would be brief.

I'm not changing my investment or trading style because of that, just saying that it might be short lived, like every correction or crash.

Rod
Deal Fanatic
User avatar
Dec 14, 2010
5490 posts
5719 upvotes
MehtabS wrote:
Sep 13th, 2014 8:43 am
If interest rate rises, gradual or spike, our economy will crash because it is debt ridden economy. Our investments are highly leveraged including housing and stock market. We do not have any source of foreign income other than selling oil and gas.
The historic rate is around 3%. Do you believe that the economy might crash because interest rates got back to normal (historical) levels?

Rod
Deal Fanatic
Mar 24, 2008
5717 posts
1830 upvotes
Toronto
rodbarc wrote:
Sep 13th, 2014 9:09 am
Markets are irrational, it doesn't have to correct. These are potential triggers (reasons to correct). My point was not to predict the market, but to show that a drop due to interest rate increase would be brief.

I'm not changing my investment or trading style because of that, just saying that it might be short lived, like every correction or crash.

Rod
I know, I was just messing with you. Although, I must admit that a buying opportunity would be nice right about now Mr. Market.
Deal Fanatic
User avatar
Dec 14, 2010
5490 posts
5719 upvotes
If the Fed keep the words “considerable time", the market will rally to new highs. But that's an unlikely scenario.

Most likely scenario is that those words will be removed and the Fed will add new language to soften the news. This scenario will lead to a selloff and the SPY will test MA(100).

Even if the Fed keeps those words on Wed, I expect the rally to be short lived.

Nice opportunity to trade some UVXY. Make sure to set your trailing stop orders.

Rod
Deal Addict
Jan 7, 2014
2400 posts
458 upvotes
Winnipeg
gilboman wrote:
Sep 13th, 2014 8:37 am
For Canada its not going up anytime soon...the US probably will go up soon but not here

Not sure why people on here think we need to move with the us on rates...our gov and boc wants loonie lower and our economy is tanking compared to the US..why would we match US rate hikes?
Fixed-term mortgage rates (unlike those for variables) are determined by bond yields, not by the Bank of Canada. Our bonds track US debt, and days ago ten-year treasuries broke through a key resistance level, suggesting there’s more to come. Partly this is in anticipation of the Fed’s next move, but also simply a reflection of an economy that is growing, inflating and in which investors are demanding a premium for holding fixed income assets.

source http://www.greaterfool.ca/2014/09/15/party-time/
Banned
Jan 11, 2004
19816 posts
560 upvotes
Asker123 wrote:
Sep 15th, 2014 8:05 pm
Fixed-term mortgage rates (unlike those for variables) are determined by bond yields, not by the Bank of Canada. Our bonds track US debt, and days ago ten-year treasuries broke through a key resistance level, suggesting there’s more to come. Partly this is in anticipation of the Fed’s next move, but also simply a reflection of an economy that is growing, inflating and in which investors are demanding a premium for holding fixed income assets.

source http://www.greaterfool.ca/2014/09/15/party-time/
greaterfool isn't a real source...except source for being wrong for a almost a decade straight now.

our bond yields (esp mortgage banks sell) do not track the US
Deal Fanatic
User avatar
Aug 29, 2012
5850 posts
3979 upvotes
at1212b wrote:
Sep 12th, 2014 8:13 pm
I second that. In fact, (forever x forever )^2
This. This is the reality no one wants to face. This is the new normal. If interest rates are raised, countless will become bankrupt and the economy will all fall apart. All the western world is stuck in the same state Japan went through earlier.

It is the direct end of the modern current consumerist western lifestyle, free trade, and the implosion of the nuclear family which have people take on countless debt but removes good and stable jobs from them.
Deal Fanatic
May 1, 2012
8746 posts
6459 upvotes
Markham
Asker123 wrote:
Sep 15th, 2014 8:05 pm
Fixed-term mortgage rates (unlike those for variables) are determined by bond yields, not by the Bank of Canada. Our bonds track US debt, and days ago ten-year treasuries broke through a key resistance level, suggesting there’s more to come. Partly this is in anticipation of the Fed’s next move, but also simply a reflection of an economy that is growing, inflating and in which investors are demanding a premium for holding fixed income assets.

source http://www.greaterfool.ca/2014/09/15/party-time/
Really? We are using that Garth Turner blog now was a source? You're one of those people, huh?

I don't disagree with your first statement, but the moment you used that as a source all your credibility went down the barrel. Are we to simply omit the fact that Garth Turner has been wrong for a good half decade?
Sr. Member
Feb 18, 2010
812 posts
287 upvotes
Greely
Interest rates may rise for other reasons, but if wage inflation ever kicks in, you can count on an interest rate hike...

Top