Why stock investors should not panic when interest rates rise

While I agree never to fight the Fed, I disagree that rising interest rates will cause a recession/crash. In fact, rising interest rates has always been good for stocks. It means that the economy is growing strongly, and the Fed wants to cool the economy.

It does mean the start of the end though. But do we know when the end is?

Take a look at the following Fed Fund Rate chart.

This chart is taken from : https://fred.stlouisfed.org/series/FEDFUNDS .

It shows the Fed Fund rates going back to 1955. The shaded areas on the chart indicates US recessions.

Notice that the US recessions coincides with Fed Fund rates dropping fiercely.

Right now, the Fed Fund Rate is increasing. There will come a time when due to some catalyst, the Fed will decide to drop the Fed Fund rate radically. That will likely trigger the next crash.

  • I'm a remisier with Maybank Kim Eng, and as a bonds and REITs investor myself, I guide my clients to build resilient bonds and REITs portfolios. If you like to be guided, please contact me regarding how to become my client; It's free!