Are you getting the best rate from your broker?
Compare your broker's rates now to find out if you can save money

Choose your broker below
Welcome to Dividend.com. Please help us personalize your experience.

Select the one that best describes you
Dividend logo

One of the main assumptions currently being made about the economy is that interest rates will slowly rise in 2017 as a result of President Trump’s stimulus efforts and the Federal Reserve’s planned rate hikes.

But economic assumptions and projections often have a way of being wrong, and it’s possible that this rising-rate consensus is wrong too. Let’s take a look at an alternate scenario — stable or lower rates — and see if that could make sense.

Supply and Demand

If we go back to basics, the level of interest rates is a function of demand and supply. Today’s low rates came about from a huge increase in the supply of money from the Federal Reserve. Greater demand, in the form of more business loans, would tend to drive rates higher. Current assumptions about higher rates are based on the idea that business loan demand will increase and that supply will stay about the same.

One of my favorite economic bears, Dr. Lacy Hunt of Hoisington Investment Management in Austin, Texas, throws cold water on the rising business demand argument by pointing out several growth-dampening signs in his latest subscription quarterly review, including that world trade volume fell 0.7% in 2016, compared to the 5.1% average growth since 1992.

To read the Full Story, Go Premium or Log In

Popular Articles

News

Caterpillar Inc Increases Dividend by 10.26%

Each day, companies across the globe announce upcoming dividend payouts. In our Dividend Payout...

News

Procter & Gamble Co Leads 35 Stocks Going Ex-Dividend This Week

There are 35 stocks going ex-dividend this week starting Monday, July 16th. For income investors...

Premium Business%20charts
News

The Market Glance for July 16: GE’s First Earnings Report After Getting Dropped From the Dow

More earnings reports from Wall Street will dominate the market this week and rising interest...