Low CD Rates Contributing to Stock Market, Gold Price Rise
Posted on December 10th, 2009
Fidelity posted a strong article analyzing the connection between low bank deposit interest rates and asset value increases in the stock market and commodities, most notably gold.
Dirk Hofschire, VP of Market Analysis for Fidelity, does a great job of showing how the low interest rates on CDs, savings accounts, and money market accounts, has caused investors–even conservative investors–to shift humongous sums of money into assets other than cash.
Perhaps the most compelling point Hofschire makes is that the U.S. is not the only country doing everything it can to keep interest rates low. Rather, today’s low interest environment is a global phenomenon.
Hofschire notes that, on average, central bank interest rates stand at 2 percent–less than half the previous low average of 5 percent in 2008.
In not unrelated news, numerous stock markets in emerging economies have doubled since March of 2009, while the price of gold has also been skyrocketing.
For conservative investors who hold money in CDs, savings accounts, and money market accounts, the temptation to seek a better return on that investment can be extremely pronounced.
Inventive trading strategies involving currency exchange have enabled clever money managers to further juice returns.
What happens to or because of this particular global phenomenon in the event (eventuality?) of higher interest rates remains to be seen.
Similar Posts:
- Fidelity CD Rates
- Bank Interest and Income Tax Rates
- Gold stocks poised for a come back
- Bloomberg vs. The Fed: What It Means for CDs, Savings Accounts, and Mortgages
- Why Bother With a Money Market Account?
Tags: Gold, Stock Market
Filed under Bank Rates |