The target for the benchmark fed funds rate, which influences interest rates for a wide range of loans like home mortgages and credit cards, had been slashed to between 0% and 0.25% to encourage borrowing when the pandemic hit last year. A higher rate is meant to cool demand and tamp down inflation in an overheated economy. A rising interest-rate environment might also shock the stock market, since stocks have benefited from the fact that other places people could put their money, like savings accounts, provided virtually no return on investment. “This is the end of an era, one of the most generous eras ever experienced by U.S. equities, Mike O’Rourke, chief market strategist at JonesTrading, said in a commentary. “For years, markets have placed exorbitant multiples on growth stocks because there was no alternative.” Have a question, comment, or story to share? You can reach Medora at medoralee@thebalance.com.
