Will a Low Fed Rate Continue to Push Up US Stocks?

While keeping rates low for long has implications on savings rates and borrowing costs, its biggest impact might be felt in the stock market, which has rallied significantly

Morningstar.com 10 August, 2016 | 8:56AM
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When the Federal Reserve slashed its Fed Funds rate in 2008 to almost zero, few thought we'd stay near these record-low yield levels all these years later. Yet here we are, with interest rates at a paltry 0.5%. This was supposed to be the year that rates would rise again for both the US and the UK, but with a sputtering global economy and some less-than-exciting US GDP numbers, Janet Yellen has taken at least some additional rate hikes off the table in the near term.

If interest rates were 5%, then more people would bonds than stocks that paid the same amount

At this point, no one knows when rates will rise to normalised levels, or if they even will. Many people, , think we could be in an ultralow interest-rate environment for years, if not decades, to come.

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