Interest Rates: a key variable that influences where and when to invest
When interest rates are low asset prices are unconstrained by gravity and climb, which they did in 2020 and 2021. When inflation spikes begin to emerge, the Fed generally starts to make noises about increasing interest rates. Naturally interest rate changes impact returns, however there is a lag-effect. Similarly, a hiking cycle takes time to bite real returns – the momentum of a buoyant market remains intact for many months before interest rates slow the system down. Adrian Clayton discusses why we believe this is important as we feel that investors are too complacent considering the Fed’s intention to increase interest rates this year.