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BREXIT and the FED: Why rates are low

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The most significant financial news in recent months has been the decision of Great Britain to exit the European Union. This caused an immediate, if temporary, plunge in the US stock market, and a “Flight to Safety” response amongst investors. Translation: The traditionally safer investments were purchased instead of riskier, higher yielding ones.  Gold, silver, US Treasuries, and Mortgage Backed Securities (MBS) were amongst the winners, which also means that homeowners and home buyers can benefit from low rates generated by the demand for these securities.  The Fed, not wishing to stir the pot any further, decided to leave rates alone for the time being, which brought rates back down after a slight run up leading up to the Fed announcement on Wednesday July 27th. Investors don’t like uncertainty, and will bulk up on safer, often lower yielding investments when the perception of turmoil appears. Since many influential investors are handling millions, if not billions, of dollars in assets, the seemingly manic-depressive nature of the players often causes what some see as over-reaction.  So… you may want to stay alert if you have significant assets or are thinking of refinancing.

 

Things can change in a hurry!


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