|
 |
|
Is The Bull Market Ending?
From the editors at WIFE |
We have now reached a milestone –
the longest surge of prosperity that our economy has ever known. But the Federal Reserve
just raised interest rates again and the stock market is off to a jumpy start this year.
Is this the beginning of the end?
Take this quiz to find out how the current economy affects you.
Q: If we have a recession, it means the stock market boom is over for good. True or False.
A: False. Recessions are a natural part of the economic cycle, just as winter is part of
the seasons. Recession happens because interest rates and inflation rise, so consumers
slow their spending, and production slows. But cheer up – economic growth cycles are
much longer than periods of recession, so even if recession hits, recover is just around
the corner.
Q: It is unlikely that a recession will happen in 2000.
A: True. If you were running for president, would you want to do so in a strong economy or
a recessionary one? So election years are rarely big years for recessions. But consider
this: If there were a recession during your term as president, would you want it when you
were running for re-election, or years earlier? For that reason, if the new president next
January sees recession on the horizon, he might do what he can to let things slide and get
it out of the way early in his administration. (But whether the president has much power
over recession is a subject of great debate.)
Q: I will get a better interest rate if I buy a ten year bond than if I buy a three year
bond.
A: False. That is usually true, but right now we have inverted interest rates. That means
that for bonds with more than a five-year maturity, the interest rate goes down, so you
are better off buying bonds in the shorter end of the yield curve.
Why do we have an inversion? We don’t know for sure, but it means that continuing
high interest rates are uncertain.
MORE » |
