Donald Trump’s policies are providing a stronger US economy at the moment with low unemployment and tax cuts leading increased personal income. The stock market is also on a wild ride, racing to record highs on a regular basis which Donald Trump loves telling us about. These factors are increasing pressure on inflation notwithstanding the demographic headwinds explained by Harry Dent demographics.
Wall Street’s banks have forecast the Federal Reserve will raise borrowing costs three times in 2018. The new Federal Reserve chairman, Jerome Powell, sees the dangers of keeping borrowing rates too low. He is not as dovish as Janet Yellen. Is now the time to get out of housing investments? Housing has had a good run is recent years and if you’re sitting on some decent returns it may be time to sell.
Increased borrowing costs will also adversely affect bond and stock prices. When will the pack start running for the exit? You want to be ahead of the pack when this occurs.
The US Federal Reserve raising borrowing costs also impacts other parts of the world such as Australia, Donald Trump is having an impact worldwide. Australian banks have borrowed from offshore lenders and as the facilities roll-over the lenders will require a better return. This will put pressure on the Australian banks to raise interest rates on their loans to housing investors.
Beware and good luck.
Since the initial post, interest rates have certainly increased in the United States as the Federal Reserve gradually increased the Funds rate by 0.5% to 2.25%. Further increases are to come so you must stash the cash away and be ready for the opportunities that may arise. Your goal is to be debt free and aspire to be part of the FIRE movement, that is be Financially Independent and Retire Early.
