Teco Energy Surges by a Record High of 25.01% on September 8
On September 8, the Tampa-based Teco Energy (TE) rose to $21.07 from $26.34. The company announced that it was bought by Emera for $10.4 billion.
The SPDR S&P 500 ETF (SPY) rebounded on September 8 and rose by 2.51% after a trailing five-day return of -0.12%.
Large caps tend to outperform small caps in rising interest rate scenarios, while small caps outperform large caps when interest rates are low or falling.
Higher rates could move both stock and bond markets. Higher rates could lead to volatile stock markets. This could lead to muted returns.
Industrials, utilities, and telecommunications have much higher leverage, as these sectors have massive capital needs.
The stock market saw high volatility during the previous rate hike between June 2004 and August 2006.
Though the disappointing March jobs report means the Fed is unlikely to raise interest rates this summer, Rick Rieder expects a September hike.
US equity markets jumped recently, and Treasury yields rose. But good news can be bad news since the Fed removed the word “patient” from the FOMC statement.
A low interest rate scenario is a positive for the economy, as credit is cheap, especially when inflation is low.
Low interest rates have supported the economy, but another side effect of low interest rates is that it discourages household savings.
The markets are now expecting the Fed to begin raising interest rates sometime this year. There isn’t a definite timeline as to when the Fed will begin to raise interest rates.
The sudden slump in crude oil (USO) prices have led to the fall in inflation in November. Inflation could remain subdued for quite some time.
Mega caps outperform small caps when interest rates rise. The last two rising rates scenarios took place during the late 90s and in the mid-2000s.
The graph above shows the history of the federal funds rate. The federal funds rate is a tool that the Fed uses to control the interest rate.
The federal funds rate is a tool that the Fed uses to control the interest rate in the economy. The rate has been close to zero for over six years.
Negative real rates boosted the economy. The real interest rate is the nominal interest rate minus the inflation rate. Currently, real interest rates are in the negative territory.
Low real rates supported equities. Although growth has been picking up, there aren’t signs of inflation increasing. This gives the Fed some room in regards to increasing rates.
The Fed (Federal Reserve) uses the federal funds rate to regulate interest rates. Interest rates remain low and could for some time.
In a low inflation rate scenario, commodities like gold (GLD)(IAU) typically underperform. The inflation rate shows no signs of picking up.
Low interest rates have propped up the economy over the last few years. They’ve also supported bond markets since low interest rates mean low bond yields.