Welcome to the December edition of FAQs and RAQs!
Here we tackle client questions—some asked Frequently, others Rarely.
FAQ: What’s the market outlook for 2026?
Predicting the future is always tricky business! However, understanding the incentives at work can be a little bit easier.
When we look at what’s driving the market right now, the incentives line up in a way that looks positive to us.
Corporate America:
With AI, the bigger risk might actually be not spending than spending. No one wants to be the next company that sat out the “next big thing.” That could keep investment flowing.
Washington:
We’re heading into a midterm year. The incentive here is pretty simple: keep the economy moving forward. That could support markets.
Everyday Americans:
In a world of ~3% inflation, the incentive for Americans is to keep investing in order to preserve their purchasing power. Millions of people are still contributing to their 401(k)s every two weeks, and that steady flow creates real buying pressure.
Put it all together, and we remain positive on the outlook, but with the usual caveat that pullbacks can show up at any time.
RAQ: How sensitive are various types of loans to Federal Reserve interest rate policy?
Different types of loans have different sensitivities to Fed policy. Don’t assume because “the Fed cut 0.25%” that your rate will move the same amount.
Credit Cards & HELOCs:
These are often very sensitive. They’re often tied directly to the prime rate, which moves almost lockstep with the Fed.
Auto Loans & Personal Loans:
These move too, but not as dramatically. Lenders also consider things like credit risk, demand, and competition.
30-Year Mortgages:
Surprisingly, fixed rate mortgages are not that sensitive to the Fed’s current rate. They tend to move more closely to long-term treasury yields.
Student Loans:
Federal loans typically aren’t tied to what the Fed does.
The bottom line: Don’t assume anything about interest rates! Do your homework and give us a call if you’d like to discuss further.
Have a question?
Drop us a line at carlsongroup@rwbaird.com. We’d love to hear from you!
All investments carry risk, including loss of principal. Past performance is not a guarantee of future results.