With interest rates trending downward for more than 40 years, investors enjoyed a powerful tailwind driving one of the greatest bull markets in history Capital Group

With interest rates trending downward for more than 40 years, investors enjoyed a powerful tailwind driving one of the greatest bull markets in history Capital Group

With interest rates trending downward for more than 40 years, investors enjoyed a powerful tailwind driving one of the greatest bull markets in history. But what happens when rates suddenly start moving up as inflation soars to levels not seen since the 1980s? We’re about to find out.

Now that the U.S. Federal Reserve and many other central banks around the world have committed to hiking rates and cutting stimulus measures, investors face an important question: Is the era of easy money coming to an end? As usual in the financial markets, the answer isn’t a simple yes or no.

“It's probably the end of free money, but I don't think it's the end of easy money,” says David Hoag, a keen Fed watcher and portfolio manager “Central banks will do what they need to do to get inflation under control, but I don’t think they will be able to go too far before the real economy starts hurting.”

Free fall: Interest rates have plummeted in the era of easy money

As of 4/11/22 Federal Reserve. Refinitiv Datastream.

As of 4/11/22 Federal Reserve. Refinitiv Datastream.