Fed raises rates by 25 bps: here’s what it means for Nasdaq Composite
On June 13th, 2018, the Federal Reserve raised interest rates by 25 basis points, marking the second rate hike of the year. This decision has significant implications for the Nasdaq Composite, a stock market index that is heavily weighted towards technology companies. The Nasdaq Composite is made up of over 3,000 companies, with a majority of them being in the technology sector. This means that the index is highly sensitive to changes in interest rates, as technology companies often rely on borrowing to fund their operations and growth. The rate hike by the Federal Reserve is expected to increase borrowing costs for these companies, which could lead to a decrease in profits and a decline in stock prices. This is because higher interest rates make it more expensive for companies to borrow money, which can impact their ability to invest in new projects and expand their businesses. However, it’s important to note that the impact of the rate hike on the Nasdaq Composite may not be immediate. The market is complex and influenced by a variety of factors, including global economic conditions, political events, and company-specific news. In fact, the Nasdaq Composite actually rose slightly on the day of the rate hike, indicating that investors may have already priced in the expected increase in interest rates. Additionally, the Federal Reserve has indicated that it plans to continue raising rates gradually, which could give companies time to adjust their borrowing strategies and mitigate the impact of higher rates. Overall, the rate hike by the Federal Reserve is a reminder that the stock market is constantly evolving and influenced by a variety of factors. While the Nasdaq Composite may experience some short-term volatility as a result of the rate hike, it’s important for investors to take a long-term view and consider the fundamentals of the companies they are investing in. By doing so, they can make informed decisions and potentially benefit from the growth of the technology sector over time.