The majority of economists polled by Reuters predict that the U.S. Federal Reserve will not raise interest rates again, and they expect the central bank to wait until at least the end of March before cutting them, as the probability of a recession within a year falls to its lowest level since September 2022.
A stock market rally is expected in the near term, as recent market corrections have created potential opportunities for investors to increase equity exposure, despite the possibility of a 5-10% correction still lingering. Additionally, analysis suggests that sectors such as Utilities, Staples, Real Estate, Financials, and Bonds, which have underperformed in 2023, could present decent upside potential in 2024, particularly if there is a Federal Reserve rate-cutting cycle.
Despite a record-breaking year for IPOs in 2021, the pace of new listings has slowed in 2022 and 2023 due to factors such as volatile markets and uncertainty over interest rates, but there is hope for a resurgence in 2024 if certain conditions are met.
Interest rates on CDs are currently high, and with the expectation of further rate increases, it may be advantageous to open a CD now to secure a higher rate, although there is a risk that rates could go higher or that you may need access to the funds before the CD term ends, in which case a high-yield savings account may be a better option.
CD rates continue to rise, with 38 CDs now offering 5.50% APY or higher, and the highest rate reaching 5.85% APY for jumbo deposits of $100,000 or more. However, it is uncertain if rates will go even higher as the Federal Reserve considers additional interest rate hikes.
The Bank of Canada is expected to keep its key interest rate steady at 5.00% and maintain that level until at least the end of March 2024, despite rising inflation and a revival in the housing market, according to economists in a Reuters poll.
Mortgage rates remain elevated, slowing housing market activity, and while home prices are not likely to fall significantly, rates are projected to decrease in 2023 and 2024.
Interest rates on CDs are currently high, making it a good time to deposit money into one for the higher returns and the predictability and protection they offer compared to regular savings accounts.
Many experts predict that savings account interest rates will remain steady in 2023 but could start dropping in 2024.
Opening a CD now can allow savers to earn a higher interest rate before inflation drops and interest rates decrease.
The Federal Reserve has indicated that interest rates will remain "higher for longer," potentially for at least three more years, in order to sustain economic growth and combat inflation.
The FDIC's latest release of national averages shows that while CD rates have been on a meteoric rise for the past 18 months, the climb may be slowing, with some terms experiencing slight declines while others continue to rise.
The possibility of a last hike in 2023 with the pause in interest rates in September may lead to the tightening and financial conditions that were not seen earlier when the Fed was raising rates faster.
Despite the Federal Reserve's decision to maintain interest rates, banks and credit unions are still increasing the rates offered on certificates of deposit (CDs), with the number of nationally available CDs offering rates of 5.65% or higher rising from 15 to 21 in just one week.
Short-term CDs with high interest rates are becoming popular among savers looking to grow their savings while maintaining flexibility, and some of the best 6-month CD rates in 2023 can be found at banks such as Merrick Bank (5.50% APY), Bank5 Connect (5.50% APY), and Bask Bank (5.25% APY).
J.P. Morgan strategists predict that the Federal Reserve will maintain higher interest rates until the third quarter of next year due to a strong economy and continued inflation, with implications for inflation, earnings, and equity valuations as well as potential impact from a government shutdown.
The recent pause in rate hikes by the Fed suggests that savings rates have reached their peak and are unlikely to go much higher, making it a good time to lock in a CD term and diversify short- and long-term savings.
Interest rates for certificates of deposit and high-yield savings accounts have increased significantly in recent years due to the Federal Reserve's rate hikes, but it is uncertain if rates will continue to rise or if they have reached their peak.
Mortgage rates have increased in the past week, with average rates for 15-year fixed, 30-year fixed, and 5/1 adjustable-rate mortgages experiencing upticks; however, it is still uncertain whether rates will continue to rise in 2023.
Summary: Opening a 1-year CD account now could be beneficial for savers due to the high interest rates, locked rates, and predictability it offers.
Despite the ongoing bear market in Treasury bonds, certain sectors of the fixed-income market, such as bank loans, short-term junk bonds, and floating-rate notes, are performing well in 2023, offering some protection from the losses in long-term Treasuries, which have slumped 46% since March 2020. The future performance of long-dated bonds depends on the Federal Reserve's monetary policy and the resilience of the economy.
The top nationally available CD rate is 6.00% APY for a term of 12-17 months, and there are several other CDs paying 5.75% APY or better, while a regional offer in five states allows for a rate of 6.25% APY; the Federal Reserve's rate hold in September does not indicate that the rate-hike campaign is necessarily over, and there may be further increases in the future.
