Essay

Chris Frost

Releasing the labor data for June has had a positive impact on the economy as a whole. Although the 195,000 jobs created by employers aren’t enough to bring the unemployment rate down a significant amount, I believe it’s a good sign for investors that there is hope on the horizon. With the new data out, there is talk that the Fed will start to decrease the number of Mortgage and Treasury bonds in the upcoming months. Some may be skeptical that this will spike the interest rates to a point that the economy might not be able to handle, but I see it as a good sign for investors.
With the recent information from the Fed tapering down the amount of bonds they purchase, and the treasury yield increasing to recent highs, I believe that over time we will see steady increases in the stock market after the initial concern of increasing rates.   However, since history has taught us that low interest rates have the biggest effect on a strong bond market, bondholders could take a big hit from these rising interest rates that seem to be here to stay. I believe the evidence of this comes from the $60 billion dollars investors in bond-focused mutual funds withdrew last month. With all this said, the Fed tapering back is a positive sign for the economy, and in turn, investors in the stock market. It shows that the Fed’s confidence about the sustainability of this economic recovery is rising. However, I’m still skeptical about the bond market especially since rising bond yields have pushed up mortgage interest rates, which could put a restraint on housing demand which has been seen to have a spark in the economy this year. Aside from the bond market I believe this is a slow, but optimistic time for investing. After the sudden scare of rising interest rates decline I believe we will see a spike in the stock market in the months to come.