US interest rate rises are a natural reaction to the global economic recovery, but this is no reason to panic.
The Fed is likely to raise rates to defend its balance sheet, and the Fed will likely not do so until mid-August.
In the meantime, it is a good idea to hold cash and bonds, or to hold a combination of both, until then.
Here are some tips on what to expect.
First, there will be a lot of volatility.
The S&P 500 will fall.
The Nasdaq will plummet.
The Russell 2000 will rise.
The Dow Jones will dive.
The broader indexes will fall by some 20% or more.
That’s bad news for investors, especially because it means that there will probably be no return to the stock market in the next couple of years.
But it’s also a good thing, since the Dow is expected to end up around 12,000 this year, which is not too far away from its all-time high.
The next big thing to watch is what happens in Europe, which has been so much of the news for the last few months.
The ECB is due to make a major decision about the size of its next bond-buying program this week, and there will also be the usual Fed announcements.
That will likely have a major impact on the dollar, but the other direction is good news for people in Asia, where the yuan has weakened and stocks have surged.
As for Europe, the European Central Bank will have to decide whether to increase its interest rate next week, which could mean that inflation is going to go up, and this could further impact the U.S. dollar, which will likely be trading higher by the end of the month.
And there will still be lots of volatility in the markets.
But that is a normal reaction to a recovery, and we should take it as a sign that things are moving in the right direction.