Why the Fed to raise rates. Is it a good time to buy or not?
Key takeaways:
The Fed has no choice. Goodbye to the era of near-zero interest rates.
Why inflation and the Fed decision matter.
The historical impacts of rate hikes on the stock market.
Is it a good time to buy? How to invest during inflation times? Take the advice of Musk and Buffett.
- The Fed has no choice.
It's time to say goodbye to the era of near-zero interest rates.
The U.S. central bank is expected to wrap up its two-day meeting on Wednesday with its first rate hike since 2018, kick-starting its efforts to tackle the country's high inflation.
Unstoppable inflation presents the Fed with a dilemma.
Soaring inflation pushes up the cost of living for consumers, while the economy still takes time to recover.
A rate hike was imminent when U.S. inflation accelerated to a 40-year 7.9% in February.
Markets expect it would start with a 25 percent rate hike.
Importantly, the Federal Reserve will unveil its plan to unwind massive economic help during the pandemic and its outlook for the U.S. economy.
- Why inflation and the Fed decision matter.
Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time.
What is the impact on the public? It indicates a decline in the purchasing power of a certain currency.
To address this, a country’s appropriate monetary authority, such as the central bank, takes the necessary steps to keep inflation within allowable limits and keep the economy running smoothly.
Raising interest rates is one of the most common measures. Higher interest rates could dampen inflation, cooling soaring commodity prices while raising borrowing costs.
The federal funds rate is one of the most important rates in the U.S. economy because it affects monetary and financial conditions and, in turn, key aspects of the broader economy, including employment, growth, and inflation.
We have mentioned many times that our life and trading are directly or indirectly affected by the changes in macro factors.
Therefore, it’s never too late to learn the basics of the Federal Reserve. (Read more: The Fed Explained: Why It Matters)
- Historical impact of rate hikes on the stock market
In the past three decades, the Fed has taken on four isolated rate hike cycles. None have weakened the equity markets.
Technology industry, which has seen wild swings this year amid the faster rate increases, has normally been the best-performing S&P 500 sector over all 4 cycles, with an average annualized return of 20.6%.
But overall, leadership varies with no sector outperforming in all four instances, the data show. (Read more: Here's a breakdown of how the Fed's expected rate hike will impact your portfolio)
- How to invest during inflation times? Take the advice of Musk and Buffett.
- How to invest during inflation times? Take the advice of Musk and Buffett.
Stock futures rallied as Asian markets rebounded sharply from panic selling.
Is now a good time to buy? Not sure. No one can predict the future and has the final answer.
But if you're going to own a good company for more than 10 years(like Warren Buffett said), then maybe it's time to spend more time looking for good stocks to watch.
A drop in price is an opportunity to increase a position. "Whether we're talking about socks or stocks, I like to buy quality items when prices drop," said Warren Buffett.
When it comes to hedging against inflation, Elon Musk and Warren Buffett have recommended similar strategies.
Own or invest in good companies. Make good use of your cash.
Tesla CEO Musk tweeted last Sunday that in times of high inflation, it is “generally better to own physical things like a home or stock in companies you think make good products,” when inflation is high.
Back in 2009, Buffett expressed the same idea that one of the best ways to protect against inflation is to own a part of “a wonderful business.”
The higher the inflation rate, the faster the cash depreciates. However, the business’ product will still be in demand when life goes on and good investments generally grow over time.
The bottom line
Finding good companies to watch is important so is choosing a good time to buy. A good buy point would help control your cost and make your investment safer.
However, it's important to remember that stock picking can be risky, and even if a company has performed well in the past, there is no guarantee that its stock will rise in the future.
Last but not least, keep in mind the three core secrets of Buffett investing: Safe, defensive, diversified. (Read more: Why is Buffett's wealth gaining as the market is shrinking?)
Market rallies don't happen in a day, and nor do pullbacks. So don't trade emotionally because of FOMO. This is when you need to calm down and take advantage of great opportunities.
For more investment knowledge and trends, moomoo Learn is always here.
For more investment knowledge and trends, moomoo Learn is always here.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Milk The Cow : The funny
thing is that "they" still expect "us" not dead yet.
to investors.
+ 
= 
One more to go, a "war" popped out of no where to deal the final blow
Moomoo LearnOP : When it comes to hedging against inflation, Elon Musk and Warren Buffett have recommended similar strategies.
Own or invest in good companies. Make good use of your cash.
HarDWireD : race riots(class), then pandemic, now verge of global war. .....little to perfect.
destabilize nations before war. I think a asian general wrote. a book a while back with a chapter similar
Sianzsation Moomoo LearnOP: Elon is saying buy Tesla good company. He is hunting indirectly!
Upncoming1841 : Tech stocks are relatively cheap and most are trading at or near 52 weeks low. I will be buying some with a long term investment horizon. As long is the companies I choose are fundamentally good, I am certain it will earn me profits over a two year holding period ceteris paribus.
Moomoo LearnOP Upncoming1841: Diligent and rational investors will finally be rewarded.
David W Clark : THANKS MOOMOO LEARN FOR ANOTHER GREAT AND INFORMATIONAL POST. I'VE SAVED IT TO READ AGAIN.
Moomoo LearnOP David W Clark: Your sweet words are the biggest encouragement and motivation to moomoo Learn.
VI7138Moo : Thanks MOOMOO LEARN for posting such an interesting topic. Indeed we need to make good use of our hard earn money..
Moomoo LearnOP VI7138Moo: Your support will be our long term motivation
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