The Fed’s decisions can also affect
your stock, bond, and
mutual fund
investments.
In the short term, speculation about the
Fed’s next moves tends to influence the pace of trading,
as investors react to what they expect will be good or bad news.
The resulting buying or selling drives prices up or down.
Over the long term, higher interest rates
may curb corporate expansion and depress stock prices, while making
bond and cash investments more attractive. Conversely, lower rates
tend to boost the stock market because people are willing to take
some added risk to get a higher return.
