Dec 15, 2016 4 min read

The Federal Reserve Board finally raised interest rates on Wednesday for only the second time in a decade. It was a quarter of a percentage point increase, just like the one last December. The Fed also indicated that it expects three rate hikes in 2017. The Dow Jones index went down 118 points on Wednesday’s announcement, but was much less than last year’s drop.

Since the election, the stock market has had a nice run-up in value. Many people thought that the market would go down if Trump won the election. That was because no one was sure what would change. A market decline has not happened because the transition seems to be going smoother than many had thought.

Now the guessing is going on over which companies will benefit the most from the coming changes. It appears that the economy will get fiscal stimulus for the first time in six years, assuming that Congress and the President can agree on tax policy and government spending. If there is an agreement, there should be a lot of infrastructure expenditure to fix our roads and bridges. This will create jobs in the construction sector and for employees of all the suppliers of raw materials.

If Trump makes good on his campaign promise, there will be less regulation, which has been hurting the economy. This will stimulate more projects and create jobs. There is also likely to be a new corporate tax structure that encourages bringing back money held overseas and rewards companies for producing more in the United States. All of these changes should spark economic growth.

Some people believe that 10-year government bonds could be paying 3 percent interest in a year.

If you have a variable rate mortgage, you should consider locking in a fixed rate if you plan to live in the house for many years. If you will be there just a couple of years, your variable may be all right. You should also consider the rates on all of your other debts; interest rates will not be this low again for a long time, if ever.

Credit card and other interest that you pay will increase much faster than the interest rate that you receive from banks. Banks have money to lend, and there is no reason for them to pay you more until they have to.

China is likely to feel a large impact from rising interest rates in the United States. It is in the middle of a massive borrowing program, and many people in China are looking for safer places to transfer their net worth, although the Chinese government is working hard to prevent this.

Rising rates in the United States will make the dollar stronger. This will make things we import cheaper and things we export more expensive. The dollar is the currency of the world’s commerce, so this could have an influence on energy prices.

The U.S. stock market has been one of the biggest benefactors of our low interest rate environment. Despite the recent run-up in value, we will have a correction at some point. This is already the second-longest bull market since World War II. The longest correction stated in 2000 and led to the lost decade for the Standard & Poor’s Index, which registered no gain for 10 years between 2000 and 2010.

I will discuss steps you should take in a future column.

Gary Boatman is a Monessen-based certified financial planner. He is the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, contact business editor Michael Bradwell at mbradwell@observer-reporter.com.