It’s official… this “imminent” move may decimate your portfolio
The Federal Reserve is signaling an interest rate hike is imminent…
Reuters reports Federal Reserve Chair Janet Yellen told the Providence Chamber of Commerce it will be appropriate for the Fed to raise interest rates “at some point this year.”
The announcement won’t surprise Teeka Tiwari’s Mega Trends Investing subscribers. He’s sounded the alarm of an interest rate hike for months.
In his May issue, Big “T”—as his subscribers know him—explained why interest rates are certain to rise in the near future… and how the fallout from those hikes will cripple a large portion of the investment universe. He calls this phenomenon “Income Extermination.”
Teeka says bondholders will get crushed as interest rates rise. Bond prices move opposite to interest rates. As rates go up, bond prices go down (and vice versa).
Since late February, we’ve seen a meaningful breakout in 10-year Treasury interest rates. The yield on the 10-year rate has gone from a low of 1.64% in February to a recent high of 2.3% on May 7.
It’s the first time in two years that rates have broken out above their 200-day moving average.
The last time this happened, yields shot up from 1.64% to 3% in just seven months. During that period, bond prices got killed. The average long-bond fund was down 21.7%. The average high-yield fund went down 9.6%.
American yields aren’t the only ones rising… Interest rates on German bonds have risen over 700% in just two weeks. That’s how crazy things can get when a bubble starts collapsing.
The German bond market, although large, is still 88% smaller than the U.S. bond market. As American interest rates start to accelerate, holders of U.S. debt will suffer mammoth losses.
Bondholders won’t be the only investors taking losses as interest rates rise. Most high-yield securities—including real estate investment trusts (REITs), utility companies, telecommunication companies (telecoms), and preferred shares (stocks with guaranteed yields) will get clobbered.
It’s not all bad news though… Other investments will rise as the bond market plummets. Teeka just unveiled his favorite way to make money in a rising interest rate environment. It’s a way to harness “the largest trend we’ll ever see in our lifetime”… with $17 trillion in global investments over just the next five years.