Investing when interest rates plunge

Dow plunges 800 points, enters correction on coronavirus fears

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Long-term interest rates in the U.S. have tumbled to lows never seen before as concerns about the economic impact of the coronavirus outbreak mount. And the Federal Reserve may cut short-term rates more in the coming months. What’s an investor to do?

The yield on the 10-year Treasury dipped below 0.7% for the first time on Friday. Rates are falling as investors buy bonds and push up their prices – which move in the opposite direction of yields – as they hunt for “safer” places to put their money. The deadly coronavirus, investors warn, could strangle supply chains and keep shoppers at home. If that worry plays out, it will shrink economic growth and corporate profits, putting a hoped-for global recovery on hold.

And borrowing rates could fall further. The Fed already surprised markets by lowering its key interest rate by half a percentage point on March 3. Federal-funds futures, which traders use to bet on the path of central bank policy, showed Friday that investors were betting there was a 100% chance the Fed would cut interest rates again at its March 17-18 meeting, according to CME Group data. Traders were also betting on subsequent rate cuts in April and June.

Long-term interest rates in the U.S. have tumbled to lows never seen before as concerns about the economic impact of the coronavirus outbreak mount. And the Federal Reserve may cut short-term rates more in the coming months.

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The low-rate world presents an opportunity for investors to adjust their portfolios in a bid to boost returns as well as protect against risks.

The reason: The level of interest rates affects how certain investments, ranging from stocks to bonds to real estate, perform.

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By Javier Manning

Javier has been in the field of content writing for almost 8 Years as he hails from the Biotechnology background. The edifying articles portray her craving towards language. His keen hobby of reading technological innovations related books or articles has sown the seed of being a well-versed editor with the current scenario of numerous industry verticals. He is one of the valuable assets to this publication. The Industry News Press has awarded him with a senior editors post based on his skillful performance to date.