It’s not just record-high U.S. stocks feeling the Fed effect

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It’s not just record-high U.S. stocks feeling the Fed effect GlobeInvestor

Jewelry shoppers, home buyers, retirees and many others are feeling the ramifications of the Federal Reserve’s decision earlier this year to halt raising interest rates, at least temporarily. For some investments, it’s been for the better. For others, not so much.

Many investors took Powell’s statement to mean that the Fed would take a break from raising rates for a while. In March, the central bank said it may not raise rates at all in 2019. This may surprise some investors because the price of gold often rises when the Federal Reserve moves away from raising interest rates. But gold tends to draw the most investors when worries are high about the economy’s strength or the prospect of inflation. That’s why gold was climbing last year when recession fears were spiking.

When interest rates drop, it means that prices for older bonds rise because their higher yields suddenly look more attractive than what newly issued bonds offer. That’s helped the largest bond mutual fund by assets, Vanguard’s Total Bond Market Index fund, to return 2.5 per cent in 2019, as of Wednesday. That’s more than it has in three of the last four full years.

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