Rate hike, rate cut — the Federal Reserve isn’t as relevant as you might think.
That’s the assessment from billionaire investor Ken Fisher, founder and executive chairman of Fisher Investments.
"When [the Fed] keeps those short rates up high, that just flows money in from overseas. It's the global yield curve that matters, not the American yield curve. It’s a global world,” he told Yahoo Finance in an interview.
Fisher pointed to an investing phenomenon that’s not getting much attention: Investors can borrow money at a 0% interest rate in Europe and invest in the U.S. for a higher return.
“It’s a real simple arbitrage operation,” Fisher said.
For context, yields on the closely watched 10-year German Bund are in negative territory, while yields on the U.S. 10-year Treasury are north of 2%.
Still, the stock market has plenty of knee-jerk reactions to Fed commentary. On Tuesday, Chair Jerome Powell said the central bank will “act as appropriate to sustain the expansion.” While the stock market was moving higher prior to the comments, stocks extended their gains following the speech and the Dow Jones Industrial Average (^DJI) ended the session higher by over 500 points. The markets largely interpreted Powell’s comments as a sign that an interest rate cut was on the table.
Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.
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