Interest Rates Going Up? Here’s How You Should Invest In The Stock Market

After two years of record-low interest rates, as of 2022 interest rates are now skyrocketing, and this can have a destabilizing effect on the stock market - and your investments.

But how can higher interest rates affect your investment portfolio? And what investments should you pursue or avoid to reduce the effects? Let’s take a look.

What Are Interest Rates?

But let’s get the basics out of the way first. What are interest rates, and what do people mean when they say the doom and gloom phrase - “interest rates are rising”?

Interest rates refer to the federal fund rates, and how those rates affect borrowing and credit rates. The federal reserve determines the federal fund rates, which becomes the target rate that banks will use to borrow from the federal reserve, in order to lend money to other banks and to consumers. These “consumers” include everyone from corporations to the everyday person who borrows money or has credit.

If the federal reserve chooses to change the cost of borrowing money, this will affect the demand for goods and services, eg. lower interest rates mean more credit cards which in turn boost sales. Lower interest rates spur the growth of the economy.

Overall, the federal fund rate is one of the most important things that affect the US economy. It affects inflation, employment, the stock market, and much more.

Low-Interest Rates

Low-interest rates are attractive for two reasons:

• It boosts economic growth so companies can profit

• Investing in the stock market becomes more attractive than keeping money in the bank.

High-Interest Rates

High-interest rates often have the opposite effect, because: