Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher explains why investors are likely better served by tuning out Fed chatter. While interest rate hike forecasts may invoke fears of a hard economic landing, Ken says it is nearly impossible to predict future Fed decisions—especially since Fed decision makers change their minds regularly and tend to be more reactive than proactive.
Ken believes investors should focus on whether bank lending is increasing or decreasing rather than what the Fed is doing at their FOMC meetings. While interest rate hikes can blunt demand for new loans, Ken says that’s only one side of the equation. Modestly higher rates can mean bigger profits for banks—a strong incentive to increase the supply of new loans. Robust loan growth speaks more to the health of the economy than the rate of those loans. As rates climbed last year, lending remained exceptionally robust. Ken says people don’t get loans to sit on the money—if banks are lending, consumers and businesses are spending, keeping the economy moving.
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