For the first time since 2015—and just the second time in a decade—the Fed has raised the Fed funds rate. The move comes as a surprise to virtually no one; the Fed telegraphed its intentions and the markets had priced a 0.25% rate hike into the market.
As JOYN’s Chief Investment Officer Aradhana Kejriwal explained in her recent interview with Atlanta’s News Radio 106.7, we think investors have three reasons to celebrate the rate hike.
- Key economic data — our focus at JOYN — show that economic activity is accelerating, GDP is rising and unemployment is falling.
- Though JOYN’s stance might seem counterintuitive, we believe rising rates are actually good for bond investors.
- The Fed’s move shows it has confidence in the economy’s growth rate and resilience. And confidence is contagious.
To learn more, read our post “Three Cheers for The Fed’s Interest Rate Hike.”
In addition, here are 3 of Aradhana’s comments from the interview:
“If you look at the economic data, which is what we focus on at JOYN, you look at the GDP growth rate. The second half, the GDP growth rate was at 2.6%. Look at unemployment; it’s touching 4.6%, which most folks would say is almost full employment. If you look at manufacturing activity, that’s improving. So overall, you see a lot of positives, which is what the Fed would be looking for to make its decision.”
“The positives of accelerating activity, diminished slack in the market — you see a much firmer rate of growth. You see GDP growth and unemployment quite down. All of that is a big support for a rate increase by the Fed.”
“A rising interest rate environment, believe it or not, is really good from the bond standpoint. Even though in the short-term you see negative prices, savers who are invested more in bonds would eventually start seeing a higher interest income, because a higher rate would give them more income, so it is definitely a positive.
The other big positive with rising rates: it increases confidence. It shows that the Fed is confident in what the economy is doing. They wouldn’t be raising rates if the economy couldn’t sustain it.”