In this short VideoCast, Mick outlines the recent changes to the 2017 Active Portfolios…
The Federal Reserve has increased US interest rates for the first time in nearly a decade, marking a milestone in the recovery of the world’s biggest economy.
In Ameraica, Interest rates have not increased since June 2006 and have stayed between zero and 0.25% since December 2008. However, this evening, the Federal Reserve raised its key interest rate by 0.25%, ending seven years of near-zero rates.
In the UK, this immediately led to calls for the Bank of England Monetary Policy Committee to follow suit.
The decision by the Federal Open Market Committee (FOMC) is a sign that the US economy is back on track after the financial crisis and ready to wean itself off the financial life support of record low rates. There have been encouraging signs for the US economy in recent months, with unemployment falling to 5% from a peak of 10% in 2009 and inflation beginning to creep up, with figures showing a bigger-than-expected rise in prices of 0.5% in the year to November. Stock markets have surged in the past two days ahead of the decision, which will end many months of uncertainty over US monetary policy. Equities fell sharply in September after the Fed made the surprise decision to keep rates on hold, causing negative reactions from the market, which had been expecting a rise.
Is this a good sign for DIY-Investors?
Let us know what you think by taking part in our DIY-Investors Poll…
[yop_poll id=”6″]
See the full text of the Federal Reserve Press Release Here.
You can also see the BBC reporting on this rate rise Here.
As usual, you can also let us have your views directly by using the Contact Us Page.
Mick (16th December 2015)
After the 154 point fall (a drop of 4.53%) in the All – Share Index (ASX) today, Mick Pavey takes a look at the ASX graph to try and make sense of what’s happening…
Want to join our community of DIY-Investors? You can do that HERE!
Sula Iron & Gold [SULA], CEO (Nick Warrell) has been involved in mining for 39 years. He started as a Trainee Mining Surveyor and has progressed through to become a Mine Owner. In this interview with European CEO Magazine, Nick talks about the lessons learned along the way, and discusses what he sees as the inevitable technological change for mining.
Some 6 years after the UK & USA started their programme of Quantitative Easing (QE), the EuroZone have finally got their act together, as reported by the BBC, as follows:
(full BBC report HERE).
The European Central Bank (ECB) has announced it will inject billions of euros into the ailing eurozone economy by purchasing bonds worth €60bn per month until the end of September 2016 – far more than previously expected. The ECB has also said eurozone interest rates are being held at the record low of 0.05%, where they have been since September 2014. ECB president Mario Draghi said the programme would begin in March.
He told a news conference the ECB would be purchasing euro-denominated investment grade securities in the secondary market. He said the aim was to achieve a “sustained adjustment in the path of inflation”, which the ECB has pledged to maintain at close to 2%.
The eurozone is flagging and the ECB is seeking ways to stimulate spending. Lowering the cost of borrowing should encourage banks to lend and eurozone businesses and consumers to spend more. It is a strategy that appears to have worked in the US, which undertook a huge programme of QE between 2008 and 2014. The UK and Japan have also had sizeable bond-buying programmes.
Governments borrow money by selling bonds to investors. A bond is an IOU. In return for the investor’s cash, the government promises to pay a fixed rate of interest over a specific period – say 4% every year for 10 years. At the end of the period, the investor is repaid the cash they originally paid, cancelling that particular bit of government debt.
Government bonds have traditionally been seen as ultra-safe long-term investments and are held by pension funds, insurance companies and banks, as well as private investors. They are a vital way for countries to raise funds.
Since then, the case for quantitative easing has been growing. Earlier this month, figures showed the eurozone was suffering deflation, creating the danger that growth would stall as businesses and consumers shut their wallets, as they waited for prices to fall.
If you think that QE has been positive in the past for the UK & USA stock markets, do you think that there will be any positive spin off for DIY-Investors as a result of this Eurozone QE policy?
Let us know what you think, using the Contact Form.
Mick (22nd January 2015)
