Sponsored post by Principal Preservation Services and Principal Wealth Services
There has been talk that Federal Reserve will be dropping interest rates two or three times this year after raising the interest rates 11 times over the last two years. The rates went from .25% in March 2022 to 5.5% in July of 2023 — where we are today. What does this news mean for you?
First of all, this should be considered good news to all! There are many positives that these drops of interest rates could provide.
Let’s start with:
- Consumer loans dropping: I’m not trying to encourage debt or taking out loans, but the cost of buying that car should be coming down. There’s also going to be an opportunity for those who had a higher loan rate to refinance that loan into a lower rate to pay it off sooner than you planned. Also, credit card rates should be dropping as well.
- Mortgage rates dropping: When interest rates used to be in the 2-3% range a couple of years ago to the 7% range today, that has had a huge impact on the housing market. Many first-time home buyers don’t want to purchase a home at these rates and other homeowners don’t want to upgrade their house with rates being so high. When these rates start to drop, there will be more people willing and able to buy or sell and buy their next home. We’re also anticipating a small spike in real estate values this year with rates coming down. So, if you were on the fence to sell your house — start getting your house ready for this spring-summer housing market.
- Bank savings rates will change: We have to take the good with the bad. When the feds start dropping rates, the banks will not be offering these high rates of returns on CDs or High Yield savings or Money Market accounts. So, it’s imperative that you don’t just let your money sit around and earn nothing again. If you have a CD coming due soon, make sure that you put it into a new one with the current rates rather than letting it just sit there. Just remember where rates were two or three years ago — we might end up there again in the next couple of years.
- Markets: With the anticipation of the rates going down, investors have had a higher level of confidence in the markets. As you have seen since the end of October 2023, the S&P 500 is up over 18% and many economists have predicted that we will break through the 5000 mark of the S&P 500. This could mean that your portfolios will be rebounded from the drop from 2022. Also, for those who hold bonds, you should be seeing an increase in those bond values. Bonds have taken a beating the last couple years as interest rates have climbed and climbed. Now, with the rates coming down, these bond values will slowly start to come up.
Mike Kojonen
Mike Kojonen is an Investment Advisor Representative and the founder and owner of Principal Wealth Services and Principal Preservation Services. He can be reached at: zvxr@cevapvcnycerfreingvbafreivprf.pbz
