Savings Account Rates Keep Creeping Up and Stock Investment Reaction

[gpyros85]

My savings account just raised rates to 1.75% from 1.60%. This puts more pressure on stocks because the NO RISK interest rate environment is getting more competitive.


With the raising interest rate environment this does not seem to stop anytime soon. This will eventually cause a re-pricing of stocks.


Thoughts?

[jacoavluha]

Rates are rising for several reasons, including global uncertainties and some feelings that equities are nearing a top. Savings accounts are lagging behind some but coming up to where they’re almost but not quite worth it, I prefer prime money market paying 2% or 6 month T bills paying a hair over 2% and are exempt from state income tax

[One]

My savings account just raised rates to 1.75% from 1.60%. This puts more pressure on stocks because the NO RISK interest rate environment is getting more competitive.


With the raising interest rate environment this does not seem to stop anytime soon. This will eventually cause a re-pricing of stocks.


Thoughts?

You are correct

[bwall]

If the interest rate continues to climb, as expected (early indicators; job creation, wage growth, PPI index), then stocks are now overpriced.

If interest rates stay steady at 2% or thereabouts, then stocks are now cheap.

The big question is of course where we are on the curve.

[DS]

One thing's for sure: Top is in.

[DreamFIRE]

My savings account just raised rates to 1.75% from 1.60%.

You're still losing money to inflation, which is going up.  Stocks are a much better investment over the long term.

[boarder42]

if by risk free you mean guaranteed to lose to inflation you are correct! but i consider that a large risk. more of a risk that stocks.

[Radagast]

Your Rate: 1.75%
1-Month Treasury Bill: 1.9%
Expected Forward 10-year Inflation: 2.2%
Expected S&P500 10-year Returns: Inflation + 4% (+/- 8%)
Historic Equity Risk Premium: 4% (very similar to what the numbers above show it is now)

Hit the snooze button.

[Rob_bob]

When rates are 5% over inflation then I will lighten up on stocks.  This doesn't count a dry powder reserve for investing during recessions.