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  • Writer's pictureHolzberg Wealth Management

How Now Interest Rates? A Brief History and Where We Are Today.

HWM Market Recap - June 2024

Holzberg Wealth Management Newsletter
Executive Market Summary

Interest rates are very much in the news. The discussion centers around when the Federal Reserve Board (FRB) will begin to lower them and how much by year-end. But what if the FRB instead raises rates or perhaps does nothing at all? What if the FRB lowers them but by less than expected or more than expected? Then again, either way, what if the FRB acts correctly or, banish the thought, acts in error? What if, miracle of miracles, interest rates are neither too low nor too high but rather just right? Or, sixty-four-thousand-dollar question, how are we even to know?


Often, history can be our guide; after all, interest rates have been around for a very long time. In the ancient world, a payment-in-kind system was common. For example, if you borrowed grain, you would repay the grain with an additional measure. If you borrowed silver, you would repay the silver with an additional measure. The rates themselves varied greatly as there were no institutional intermediaries to provide efficiency and competition.


Interestingly, there is a good amount known about the history of interest rates. By their nature, lending transactions take place over time. They are, therefore, necessarily written in some sort of record. Many of those old records have survived for researchers to examine. During the Dark Ages, there were usury laws that prohibited interest charged on loans. During the Renaissance, interest rates varied widely and could be quite high. Over time, as markets and institutions developed, interest rates began to settle in right about where they are now.


Historically, the interest rates that we experienced from 2008 up until the last two years were very unusual. That is, for most of that time, zero or near zero interest rates. Indeed, in much of Europe, interest rates were negative. Trillions of dollars of government bonds were issued where the investor (mostly big institutions) paid the government for the privilege of borrowing their money. The point being that today’s interest rates are much more normal than our recent experience.


Are lower interest rates automatically good? Everything else being equal, if you are a borrower of money, then low rates are good. If you are a saver of money (and wish to earn interest on your savings), then higher rates are good. The obvious answer is for rates to be neither too high nor too low but rather just right. For better or worse, in our modern-day system, we are reliant upon the FRB to determine much, but not all, of our interest rates. Indeed, there is an ongoing debate in financial and economic circles as to whether the FRB leads the market or the market leads to FRB.


All of this may be very interesting, and we can attempt to predict how rates will change. However, truth be told, even the FRB with 400 PhDs in economics working for them has a poor prediction track record. Therefore, all of us must make financial decisions considering the interest rates that are here and now. The fact that borrowing is more expensive will impact many a decision – mortgages, car loans, and credit cards come to mind. The fact that interest-bearing securities are paying higher rates than in recent history has led many people to invest their savings to earn interest – treasury bills, bonds, and money market funds come to mind. History teaches us that the best course of action is to make the decisions that are right for you, considering today’s marketplace and your individual needs, risk tolerance, and personal preferences. As always, we are here to help and advise on how best to manage today’s interest rates in your finances and investments.

Markets Overview

​Monthly Changes in Indices

  • S&P 500: +5.16%

  • DJIA: +2.07%

  • Nasdaq Composite: +7.24%

​Year-to-Date Changes in Indices

  • S&P 500: +11.27%

  • DJIA: +2.58%

  • Nasdaq Composite: +13.34%

​Monthly Performance By Sector

  1. Technology +8.18%

  2. Utilities +7.72%

  3. Communication Services +5.96%

  4. Real Estate +5.08%

  5. Financials +3.17%

  6. Consumer Staples +3.09%

  7. Materials +2.74%

  8. Health Care +2.22%

  9. Industrials +1.89%

  10. Energy +1.27%

  11. Consumer Discretionary +0.83%

​Year-to-Date Sector Performance

  1. Communication Services +15.24%

  2. Utilities +13.18%

  3. Technology +12.12%

  4. Financials +10.28%

  5. Energy +9.98%

  6. Industrials +9.46%

  7. Materials +7.19%

  8. Consumer Staples +6.18%

  9. Health Care +3.55%

  10. Consumer Discretionary -0.67%

  11. Real Estate -5.89%

​News Influencing the Economy
  • According to the U.S. Bureau of Labor Statistics, the Consumer Price Index increased by 0.3% in April after rising by 0.4% in March. Over the past twelve months, the index increased by 3.4%. The Core CPI (excluding food and energy) rose by 0.3% in April after rising by 0.4% in the three preceding months. Over the last twelve months, Core CPI increased 3.6%.

  • Personal Consumption Expenditures (PCE) rose by 0.3% month-over-month and 2.7% year-over-year. The Core PCE, the Fed’s preferred measure of inflation that excludes food and energy, increased by 0.2% between March and April and by 2.8% from a year prior.

  • Inflation expectations from the New York Federal Reserve Bank showed that the average expectation for the coming year declined slightly to 3.2%, remained unchanged for the three-year horizon ahead at 2.8%, and increased for the five-year horizon ahead to 3.0%.

  • Mortgage rates fell below 7% for the first time since April of this year.  According to Freddie Mac, the weekly average for a 30-year fixed-rate mortgage is 6.99%.

  • The National Association of Realtors reported that total existing home sales decreased by 1.9% between March and April. Year-over-year, sales fell by the same percentage rate. Meanwhile, total housing inventory increased by 9% between March and April and jumped 16.3% from the year prior. The median existing-home price for all housing types was $407,600 in April, a 5.7% increase from the prior year.

  • The U.S. economy added 272,000 jobs in May, and the unemployment rate increased slightly from last month to 4%.

  • The University of Michigan’s Consumer Sentiment report shows a significant 10% decline between May and April. This brings the sentiment index to its lowest reading in about five months.

  • A group of more than two dozen investors, including BlackRock and Citadel Securities, are seeking to start a new national stock exchange in Texas to rival the New York Stock Exchange and the Nasdaq. The Texas Stock Exchange (TXSE) plans to seek registration with the SEC later this year and start trading in 2025.

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About the Author

Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and virtually nationwide with the financial decision-making process to organize, grow, and protect your assets.

** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions.


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