The highest percentage of Affluent investors in favor of an interest rate increase identify themselves as Independent compared with Republicans and Democrats.
When, and by how much?
These are two questions about which analysts, pundits, commentators and investors alike are speculating in regard to the Federal Reserve’s decision to raise interest rates.
In a recent Spectrem Group Investor Pulse survey of Affluent investors, nine percent said it was the news story that is most affecting their current economic outlook behind international economic developments and the domestic political environment percent. This is up from 6 percent in February when the survey question was last asked and at a time when current speculation is that the Federal Reserve will raise interest rates for the first time since 2006 as early as this month.
A substantial majority of Affluent investors (64 percent) are all for it, according to a new Investor Pulse survey conducted by Spectrem Group for Millionaire Corner. Enthusiasm for the prospect of raised interest rates increases with age and net worth. Roughly seven-in-ten respondents over the age of 60 said they are in favor of an increase in interest rates by the Federal Reserve, compared with 59 percent of Baby Boomers ages 51-60, 55 percent of Gen Xers and 43 percent of Millennials.
The wealthiest respondents, too, were most in favor of an interest rate increase, 77 percent of those with a net worth of at least $5 million compared with 44 percent of households with a net worth of less than $100,000.
Across political parties, the highest percentage of Affluent investors in favor of an interest rate increase (71 percent) identify themselves as Independent (or other), compared with 64 percent of Republicans and 61 percent of Democrats.
In response to the economic collapse that began in 2007, the worst financial crisis since the Great Depression, the Federal Reserve, in part, reduced the level of short-term interest rates to near zero in a bid to stimulate the economy.
The Labor Department’s closely-watched jobs report released Friday did little to move the needle on whether the Fed will or should raise interest rates when policy makers meet in two weeks. Employers added a less-than-forecast 173,000 jobs in August, but the unemployment rate dipped to 5.1 percent, the lowest in seven years.
The slowdown in job growth and the absence of any significant wage pressure could strengthen the arguments of those who see little risk in waiting not just for more positive economic data but also for market volatility to ease. A New York Times report last week suggested there were “enough positive indicators to keep a September tightening in play, even as Wall Street turns more attention to the possibility of a Fed move in October or at the central bank’s last meeting of the year, in December.”
Assuming the Fed does raise interest rates this year, how much do Affluent investors think they should be raised. The highest percentage (44 percent) think interest rates should be raised .35 percent, while one fourth believes they should be raised .50 percent. Households with a net worth under $100,000 are the most if favor of a .25 percent increase (49 percent), while the wealthiest households surveyed with a net worth of at least $5 million. Analyzed by political party, a higher percentage of Republicans are in favor of a .25 percent increase (49 percent vs. 40 percent of Democrats), while a higher percentage of Democrats favor a .50 percent interest rate increase (29 percent vs. 21 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.