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THE FED RATE HIKES – 2022:
The Federal Reserve JUST hiked interest rates 50 Basis Points – and signaled that they’re open to further 50 Basis Points Hikes in the future. The concern was that we could have had what’s known as “The Volcker Shock.”
Paul Volcker was tasked with the goal of bringing DOWN INFLATION…and, after securing his position in the federal reserve, “he announced that he would start limiting the growth of the nation’s money supply. As money became more scarce, banks would raise interest rates, limiting the amount of liquidity available in the overall economy.”
HOWEVER…the end result was that, interest rates quickly jumped as high as 20%….the United States fell into a deep recession…unemployment surpassed 10%…and stock and real estate values PLUMMETED….but, hey…at least on the bright side…by 1983, Inflation dropped below 4% as the economy began to recover…so, that’s good…right?
In a PERFECT WORLD….the Federal Reserve can slowly increase rates, inflation gradually begins to decline, and the economy shakes it off like Taylor Swift to continue moving forward…but….they don’t have the best track record of doing that.
Out of the previous 13 rate hike cycles…10 of them have preceded a RECESSION…and, as Fannie May concludes…it’s a LOT more likely that we’re going to see, what they call “A HARD LANDING,” right as the Fed Signals that – they’re about to be MUCH more aggressive than they have been, in the past. In fact, they even go so far to say that: “We believe enough has now changed over the past couple months to expect this eventual downturn by the end of 2023.”
Now, OBVIOUSLY…every time period is going to be different, and every situation is going to be unique…but, with the Federal Reserve having a history of “Hard Landings”…and, SPOOKING THE MARKET…I think, the best thing we can do, is stay employable…make yourself indispensable as possible, IF we see a recession…keep a 3-6 month emergency fund at all times…only take FIXED RATE DEBT if you’re buying a house, or a car….and, only make investments that you plan to keep for at least 7-10 years.
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*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/