Winners and loosers from FED news
The effects of raising interest rates the Fed will not be one way for the US and the rest of the world. Some countries, sectors and assets will surely prove to be profitable, while others will lose incentives that supported them in recent years. Still others probably will not feel a significant change, writes Bloomberg.
Among the winners of the tightening of monetary policy in the United States were the central banks in the eurozone, Japan and China, which go in the opposite direction and increase financial incentives. “The decision Fed increases the impact of their efforts. The biggest winners are the countries with low inflation, which export much of the US market,” said Carl Rikadona, chief economist at Bloomberg Intelligence.
Raising interest rates will make it more attractive assets as long-term securities. “Large pension funds waiting for the lifting of interest rates to start buying debt and improve profitability,” says Anthony Gould from JPMorgan Asset Management. According to forecasts only pension funds will increase investment in debt by 68 bln. Dollars in 2016, and other institutional investors will buy bonds total 1.1 trillion. dollars. Another big winner in improving profitability will be insurers, whose return on investment has fallen to the lowest levels in half a century.
One of the obvious losers emerges federal budget of the United States. The government may pay additional interest of 2.9 trillion. dollars for the next 10 years, and that if the increase is gradual, says Dean Baker, director of the Center for Economic and Policy Research.
The effects of higher interest rates will not be limited only to the US. One of them would be a weakening of the currencies of emerging markets such as Brazil, which will complicate existing problems with high inflation, slow growth and political instability. There are serious risks for China’s economy. “There debts continued to grow twice as fast as GDP. This is not a sustainable model,” says Rupir Sharma of Morgan Stanley Investment Management.