Across age groups, the youngest respondents under 40 are significantly more likely to take some action before interest rates are raised.
Better than forecast jobs data released at the beginning of the month, coupled with a drop in the unemployment rate to a near seven-year low, sent U.S. stocks tumbling as investors speculated anew about when the Federal Reserve would raise interest rates. The Dow Jones industrial average suffered its worst drop in five weeks, while the drop in the Standard & Poor’s 500 Index was the most in two months.
Mid-month, investors and analysts parsed a Federal Open Market Committee statement that dropped previous language that the Fed can be “patient” regarding interest rate hikes. The new language said that current interest rate policy “remains appropriate.” Federal Reserve chair Janet Yellen elaborated in a press conference following the meeting, “Just because we removed the word ‘patient’ doesn’t mean we’re going to be impatient.” Stocks surged 300 points.
Last week, following the release of more positive economic data, Wall Street suffered yet another drop that was tied to investors’ perception that a rise in interest rates is even more likely.
Since the onset of the Great Recession, the Fed has kept interest rates near zero, Consumer spending comprises 70 percent of the economy. A rise in interest rates means that people will have less discretionary money due to increases in what it will cost to borrow from the bank or a spike in credit card and mortgage interest rates.
At present, the over/under is on June for the rise in interest rates. What do Affluent investors plan to do before the inevitable happens? According to a new survey of affluent households conducted by Spectrem Group, not much.
The highest percentage (13 percent) said they would renovate their present home. Less than 10 percent said they would:
- Purchase a new home (6 percent)
- Refinance their mortgage (5 percent)
- Remodel their home in anticipation of a sale (3 percent)
- Take out a home equity loan or line of credit (2 percent)
- Three-fourths replied they would do none of the above.
Across age groups, the youngest respondents under 40 are significantly more likely to take some action before interest rates are raised. They are more than four-times as likely to say they would purchase a new home (26 percent), remodel their home in preparation for a sale (13 percent), or refinance their mortgage (11 percent)
Baby boomers ages 51-60, who, studies find, much prefer to stay in their homes and communities as they age, were the most likely to say they would renovate their home (17 percent).
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.