The impact of low interest rates on the economy and financial markets: challenges for investors.

The impact of low interest rates on the economy and financial markets: challenges for investors.

According to a report by themarket.ch, low interest rates can lead to unhealthy developments in the economy and financial markets. It should be noted that the rise in interest rates is now revealing the problematic consequences of easy money. The long-term economist addresses the importance of low interest rates, emphasizing how they can change and distort investor behavior and the serious consequences that can result. Furthermore, the effects of low interest rates on the economy, the financial markets and the performance of investments are examined.

Low interest rates stimulate the economy

The low use of funds for money lending, i.e. interest rates, means that companies can increase their borrowing and thus invest. This serves as motivation and acceleration of economic growth. However, too fast economic growth when interest rates are low can lead to inflation and ultimately to interest rate increases.

Low interest rates reduce perceived opportunity costs

Since there is hardly any interest on investments in low interest rate environments, it appears more attractive to make larger investments since there is no significant loss of income. This can cause assets to be overvalued.

Low interest rates increase the price of assets

The present value of assets increases when interest rates are low. This can lead to overvaluation of assets, which can lead to losses in the long term.

Overall, the economic expert clarifies the effects of low interest rates on the economy and the financial markets and highlights the potentially negative consequences. It should be noted that these effects are often underestimated and that caution is required to avoid negative consequences.