As the financial media bounces from data point to data point trying to handicap the odds of future interest rate increases and proffers dire predictions for investors, we want to take a step back and provide a balanced assessment of the situation for long-term investors. While we do not want to cast a blind eye to the real risks for investors should the Fed make a policy misstep, there are positive aspects that seem to be consistently overlooked.
First, it is worth noting that while the likely direction of monetary policy is tighter—or less conducive to economic activity—the policy nonetheless remains very accommodative and should continue to support growth. Second, do not forget why the Fed is contemplating a rate increase in the first place: because they believe the US economy is strong enough to withstand (or in fact requires!) higher interest rates. And finally, we believe a return to more normal interest rates is healthier in the long run for all investors.
For additional perspective please see our Flourish Insights – Investment Update June 2016.