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Rate Rage on the Horizon?

December 14, 2015

Wall Street was yet again impressed with a jobs report (in October), reflecting a strengthening economy. Now we should see resulting Fed action to raise interest rates from their “emergency levels” – right? No and it’s a continuation of a long-standing pattern.

 

Well, at some point rates will rise. Maybe December 2015, maybe later. And I can’t imagine the reaction on Wall Street and Main Street will be favorable.

 

Despite market returns (the October Dow was up nearly 8.5% and remained barely positive in November), the Wall Street/Main Street disconnect is as strong as ever – and getting worse.

 

Consider these facts:

 

30 million Americans withdrew from retirement accounts early

 

Because they needed cash, several Americans withdrew funds from their retirement accounts before age 59-and-a-half, incurring taxes and penalties. Another 21% of savers borrowed against their nest eggs.

 

Working age adults still live with their parents

 

Young people are getting married later and also cite student loans and stagnant wages as reasons they don’t leave. While unemployment for them is down, most new jobs are service jobs that don’t pay well.

 

Foreclosures are rampant

 

October 2015 foreclosure notifications jumped 12% from the previous month. Repossessions were up 31%, indicating that people are having serious trouble staying in their homes. 

These are all strong, clear signs of an ailing populous. The disconnect between investors and typical Americans is too strong and large to ignore any longer.

 

In that light, how will higher interest rates affect everyday people? My guess is not so well.

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This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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