Don’t Worry, Interest Rates Aren’t Going Up – At Least Not Enough to Badly Hurt Stocks

With inflation coming in at an annualized rate of 10% in April, there is fear among some investors that inflation will push up interest rates.  Not a chance.  Maybe a little increase, but not a lot.  The Fed may talk about raising rates, but it won’t do anything big.

Why?  The Fed will be forced to focus almost entirely on keeping interest rates low.  It has to.  Our stock market, our real estate and our economy absolutely depend on those low rates.  Without those low rates, we’re in a heap o’trouble!

If the government can’t sell many bonds at 2% when inflation is 5%, expect the Fed to simply buy all the bonds the Treasury can’t sell.  It already is and it won’t stop then. 

If inflation hits 8%, expect the Fed to buy more bonds that the Treasury can’t sell. 

So, instead of raising rates to fight inflation, it will fight higher interest rates by raising inflation.

And, they are making the right choice for the stock market, real estate market and the economy.  An increase in interest rates to 5%, 8% or 10% would devastate the markets and the economy. 

Whereas inflation of 5%, 8% or 10% won’t hurt markets or the economy nearly as much.  In some ways, inflation could even help.

So, the Fed’s response to higher inflation in the future?  Simple.  Print more money!  Buy more bonds to keep interest rates low.  Keep the economy and markets from collapsing.

Is that a problem long term?  Oh. My. God. Yes!!!

But the government and Wall Street don’t look at the future -- they worry about an immediate collapse.  That makes sense – sort of.  Nobody likes a collapse.  So, the Fed isn’t going to trigger it.  And neither will Congress. 

What will?

Keep reading our alerts and you’ll find out.