Interest Rates Going Up 😲 Where to Invest? Banks? Commodities?

TL;DR

Analyzing the effects of previous federal reserve interest rate increases on investments like banks, commodities, and stocks can help inform future investment strategies.

Transcript

hi i'm jimmy in this video we're going to look at what could happen once the federal reserve starts raising interest rates which they're supposed to start doing later this year to determine what could potentially happen we're going to look at some of the previous times where the federal reserve has increased interest rates and we're going to look a... Read More

Key Insights

• 🥺 Banks tend to benefit from interest rate spreads widening, potentially leading to higher profits.
• ☠️ Commodities, like gold and silver, may not always see significant gains during rate increases.
• ☠️ The S&P 500 showed consistent strength across various rate hike periods.
• 😥 Large-cap stocks, like those in the S&P 500, could be a good starting point for investments.
• 👲 Small-cap and mid-cap stocks experienced declines recently, potentially creating value opportunities.
• 🏦 Diversification with banks in the investment portfolio can be beneficial.
• ❓ Overpaying for any investment should be avoided, especially given the current unusual economic circumstances.

Questions & Answers

Q: How did banks perform during the periods of interest rate increases?

Banks had a decent performance, but they fell short of the broader S&P 500, gaining around 8.5% compared to the S&P 500's 11%.

Q: Did commodities like gold and silver fare well during interest rate increases?

While commodities, including gold and silver, posted gains, they were only slightly up. The Bloomberg commodity index showed a 12% gain, but gold and silver had little movement.

Q: How did different stock classes perform during the financial crisis and subsequent rate cut?

Gold emerged as the best performer during the financial crisis, with a return of about 110%. However, leading up to the crisis, banks performed well, gaining around 30%, while all stock classes saw gains.

Q: What were the best performing asset classes during the most recent rate hike increase?

The S&P 500 performed the best, followed by all stocks in general. Banks were not far behind, while commodities had a lower performance.

Summary & Key Takeaways

• The video examines previous periods when the Federal Reserve increased interest rates to determine the best-performing investments during those times.

• Examples include banks, commodities like gold and silver, and different stock classes such as large-cap, small-cap, and mid-cap stocks.

• Overall, the S&P 500 performed well in each period, while banks and commodities had mixed results.