Introduction

Analyzing the effects of higher interest rates on investors, savers, and borrowers, examining the relationship between bond yields and inflation, and exploring the implications for economic growth, job opportunities, and national debt sustainability.

Transcript

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Episode notes

We explore six impacts of higher interest rates on housing, capital projects, stock buybacks, excess returns for stocks, bonds, and other asset classes, and individual opportunity costs.

Topics covered include:

Where current interest rates stand
Central banker predictions for how long cash yields will stay this high
Why housing is the least affordable since the early 1980s
Why new apartment building construction has collapsed
What has been the excess return for stocks, bonds, and other asset classes when interest rates are higher and lower
Why there will be fewer stock buybacks and how that can impact earnings per share
Which alternative investments do better when short-term interest rates are higher
Why financial opportunity costs have increased and how that should impact our investment and other financial decisions.

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Show Notes

Summary of Economic Projections—The Federal Reserve

The Apartment Market Is Hitting a Construction Lull by Will Parker—The Wall Street Journal

30-Year Fixed Rate Mortgage Average in the United States—FRED Economic Data

Americans Are Still Spending Like There’s No Tomorrow by Rachel Wolfe—The Wall Street Journal

Honey, the Fed Shrunk the Equity Premium by Portfolio Solutions Group—AQR

Companies ease off on share buybacks as rising interest rates push up costs by Nicholas Megaw—The Financial Times