This year, the Federal Reserve raised interest rates for the first time since 2018.
But what do these rate hikes mean for investors and the broader market? Let’s talk about it.
Factors such as worker shortages, rising wages, and supply chain woes pushed inflation to a 40-year high. People have felt it in the price of everything from a dozen eggs to a gallon of gas. Raising interest rates is one way the Federal Reserve fights inflation
At their core, these rate increases make it more expensive to borrow money, whether it’s for a home, car, or personal business loan.
Making loans more expensive may encourage people and businesses to be more selective in their spending and investments.
This can help bring down prices and combat inflation, but it can also mean economic growth may slow down, which can contribute to market volatility.
While the Federal Reserve manages this balancing act, investors can consider a rebalancing of their own.
Investors might consider dedicating a portion of their portfolios to quality companies, those with stable cashflows and higher profit margins that can absorb or pass on higher prices.
To prepare for a potential slowdown in the economy, investors might want to also consider Minimum Volatility ETFs such as iShares MSCI USA Min Vol Factor ETF.
Most importantly, remember that market dips and spikes are part of normal, long-term cycles. And these small, progressive steps may be a possible solution to help investors — and the market itself — return to normal in the long run.
Visit www.iShares.com to view a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal.