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Will the Rates Rise?

Elijah Jumper, C'26

graph of interest rates

Greetings all! This is the first week back from Easter break and the first blog post after the break. The last week in finance had a few unconventional topics spring up that aren't typically written about in these blog posts. In the 7th blog post for this semester, I'll go over a couple of these unconventional finance topics.

First, this week in finance saw huge questioning around the topic of rate cuts. Rate cuts have been a brief point in a few of the prior blog posts but never covered substantially. The rate cuts in question refer to the Federal Reserve and the interest rates they control. In the aftermath of the covid pandemic, the Federal Reserve continually raised their interest rates in an effort to avert large inflation, or to at least tame it. When these rates are raised, investors see a direct effect on cash investments such as CDs and bonds. Inadvertently, this has the possibility of affecting stocks as investors may flock to cash investments that now have a higher interest rate, and therefore a higher yield, and because they are safer than the stock market. The last few months, the Federal Reserve has held their rates steady, and many have questioned whether they would raise or lower rates in the coming months. In the last week, many investors have been going back and forth with quite a bit believing the Fed won’t change rates at all, as it is believed the U.S. economy is doing fine with the way things are.

This will be an interesting topic to follow as it had direct effects on loans and cash investments. Additionally, it can give signals as to what members of the Federal Reserve see happening in the future for the economy. I still hold true to my prediction that there will be two rate cuts this year, with the first possibly coming in July or August. Although, this belief could change as things in the financial world continue to play out.

A brand-new topic that hasn’t been discussed before in the blog posts is the monthly job report. In the last couple of days, the most recent job report was released and many financial news sites and others alike had a lot to say about it. The job report is a monthly report that is released that highlights the number of new jobs added in the United States and the unemployment rate. Although this has no direct impact on financial investments, it is a tool used by many investors to gauge how the economy is doing and whether it is a good time to invest or not. The latest job report showed that there were over 300,000 new jobs added, far higher than the estimates. It also showed that there was a decrease in the unemployment rate. Personally, I think the job report can be useful as a general oversight, but I don’t look too deep into the report to judge investments as it can be deceiving and because there are so many other variables that are more important when making investments.

Thank you all for reading this week’s blog post! Have a great weekend.

Elijah Jumper, C'26