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Interest Rate Cut on the Horizon…what’s next?

Posted on by careyourpresent

Interest Rate Cut on the Horizon…what’s next? This must be in the mind of many investors, especially for those into sensitive to rate instruments, such as S-REITS.

Before the actual rate cut in the next few days, SREITs are up by more than 10% for the past few weeks.
Congrats to fellow investors! I think my portfolio at least up by 50k or more.

Rates are already down

Before official rate cut announced by Fed, the rates are starting to come down. One can see from the Fixed deposits offered by banks, SSB coming down, treasury yield coming down etc…

I have already locked 400k worth (together with spouse) in SSB as emergency fund… guess just collect 1k per month worth of cash for the next 10 years at average rate of 3+%.

So what’s next?

For me I will have investible cash, waiting for pound on next opportunities. Meanwhile just keep calm and enjoyed the harvests that I have planted for the past few months/years.

Let’s ask AI

This is the question that I have input
“Interest rate cut on the horizon. what is next?”

FROM MS Co-pilot.

It looks like an interest rate cut is indeed on the horizon, with the Federal Reserve expected to make its first rate cut in years, possibly as soon as September12. This potential cut is largely driven by cooling inflation and a job market that no longer threatens to overheat the economy2.

Here are a few things that might happen next:

  1. Lower Borrowing Costs: If the Fed cuts rates, borrowing costs for consumers and businesses could decrease. This includes lower mortgage and auto-loan rates2.
  2. Increased Refinancing: Homeowners might see an opportunity to refinance their mortgages at lower rates1.
  3. Stock Market Reactions: Financial markets have already started to price in the expected rate cuts, so we might see some volatility as investors adjust their strategies1.
  4. Economic Growth: Lower interest rates can stimulate economic growth by making it cheaper to borrow and invest2.

FROM CHATGPT

When central banks cut interest rates, it’s typically a response to slowing economic growth or low inflation, with the aim of stimulating the economy. The implications of an interest rate cut can unfold in various ways:

  1. Lower Borrowing Costs: Consumers and businesses benefit from reduced borrowing costs. Loans, mortgages, and credit often become cheaper, encouraging spending and investment. This can stimulate economic growth in areas such as housing, business expansion, and consumer spending.
  2. Weaker Currency: Interest rate cuts often lead to a weaker domestic currency, as lower rates make a country’s assets less attractive to foreign investors. A weaker currency can boost exports by making them more competitive internationally, but it can also lead to higher import costs and inflation.
  3. Stock Market Boost: Equities tend to rise in response to rate cuts because companies can finance growth more cheaply, and investors often move out of low-yielding bonds and into stocks. This can create short-term stock market rallies.
  4. Bond Market Response: Bond prices typically rise as interest rates fall, since the existing bonds with higher interest rates become more attractive. However, future bond issuances may offer lower yields.
  5. Real Estate Market Surge: Lower interest rates can fuel the housing market by making mortgages more affordable. This can lead to increased home sales and higher property values, although it can also increase housing affordability challenges in already hot markets.
  6. Inflation Risk: Prolonged low interest rates can lead to inflationary pressures if demand overheats. Central banks need to balance between stimulating growth and keeping inflation in check.
  7. Savings Impact: Lower interest rates tend to reduce returns on savings and fixed-income investments, which may affect savers, particularly retirees relying on interest income.

Next steps will depend on how the economy responds:

  • Further cuts or unconventional measures: If the rate cut isn’t enough to spur growth, central banks could signal more cuts or even deploy unconventional tools like quantitative easing (buying bonds to inject liquidity).
  • Monitoring inflation and growth data: Central banks will closely monitor economic indicators to decide if more action is necessary.
  • Market and investor reaction: Investors may adjust portfolios, shifting from bonds to stocks or real assets like commodities, depending on the perceived future economic conditions.

Hi AI

AI are getting more powerful each day. Maybe one day we will have Ultron taking over the world. Who know? So what do you think will happen next after rate cut?

Most importantly, what is your plan now?

Good articles that you should read!

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CAREYOURPRESENT

Money just buy you the chance of freedom.

When you are young and working, you exchange time for money. When you are old, you can have lots of money but you can’t buy time back, especially the things that you have missed while busying striking out in career. Of course, if you love your career, and consciously know that you are missing out the first time your child walk or talk, that’s ok, but if you are the other spectrum, please do something about it.

Your kids grew up and they no longer need you to accompany them. They no longer want to sit on your lap to share/do things with you…all these time you spent in your 9 to 6 or even longer cubicles…can the money that you have earned by you back these?

We always thought we have more time with our old parents, but we are wrong. Time with them is ticking away every day. One day it will suddenly be gone. There is no regret medicine, no reset in time. Gone is gone and cannot come back. No matter you are billionaires or millionaires, you cannot reset this.

We always thought that we have more time with our spouse every day, but we are wrong. One day they will be gone too. When you read this, please go tell your spouse that you love him/her and he or she is the best thing that you ever had in your life.

I have picked out some of the more life reflecting articles of the CAREYOURPRESENT series. Do read them:

You can read more about my articles on Careyourpresent via the Category “Careyourpresent” or simply click “Careyourpresent” via the main menu bar.

REMEMBER:

Love your life daily.

You have one less day with your spouse, parents, children and yourself.

Time is ticking away.

For each passing day,

Enjoy and Treasure your Life!

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