Will Rising Interest Rates Impact Penny Stock Investing?

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Penny Stock Research
Will Rising Interest Rates Impact Penny Stock
Investing?
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• Hi, My name is Aaron and Im with Penny Stock
  Research, today were reviewing our recently
  published article

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• Will Rising Interest Rates Impact Penny Stock
  Investing?

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• Lets clear something up. Interest rates are
  important even for penny stocks. You see,
  interest rates are a major variable in how well
  or poorly the economy is doing.

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• Thats why the Fed has a powerful impact on
  economic performance. As such, even as penny
  stock investors, you dont want to just ignore
  interest rates. The overall economy certainly
  impacts penny stock companies, just like
  everything else.

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• On the other hand, interest rates direct impact
  on penny stock performance is going to be less
  than other, larger companies.

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• Ill get to that in a minute. First off, lets
  quickly review the current interest rate
  environment. Heres a look at what 10-year
  Treasury yields has done over the last year

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• As you can see, the yield on 10-year bonds has
  basically been above 2 since the spring.
  However, it hasnt made its way up to 2.5 yet
  this year. Its been closer to 2 than 2.5
  since August.

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• So where are interest rates headed next?

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• Most likely, the minor slowdown in the US
  economy, along with the issues in emerging
  markets, will result in the Fed keeping rates at
  current levels until 2016. That means the Fed
  Funds rate will remain at around 0.

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• That also means the 10-year bond yield will
  likely stick between 2 to 2.5 for the time
  being. However, bond yields are related to
  future expectations of rates, so we could see a
  higher move in yields

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• before the Fed actually makes any changes. Still,
  nothing is likely to happen anytime soon. When
  rates do start to rise probably early to mid
  2016 its going to be a slow rise.

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• Well mostly likely see rate hikes in increments
  of 25 basis points every couple months. The Fed
  will make sure not to raise rates too quickly.

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• While small rate hikes wont mean a whole lot to
  most consumers, they could have a large impact on
  the business world. Financial companies in
  particular will see very large impacts from even
  the smallest changes in rates.

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• So how do interest rates impact penny stock
  investing?

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• As I mentioned earlier, penny stocks can be
  impacted by rates if a raise in rates slows down
  the economy. A rising tide lifts all boats, so
  to speak.

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• But, the Fed should raise rates at a slow enough
  pace that an economic slowdown should be avoided.
  What about a direct impact?

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• Well, larger companies who have to take on debt
  (or who have variable rates on their current
  debt) will certainly feel the sting of higher
  rates. It will make debt more expensive. That
  could definitely eat into profits.

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• Fortunately, many penny stocks dont have a lot
  of debt because theyre small enough to get by on
  organic growth or existing cash holdings. That
  makes low-debt penny stock companies a good
  investment in a rising rate environment.

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• After all, you probably dont want to be
  investing in heavily indebted penny stocks
  anyways. Its hard to enough to grow a business
  without a major debt burden. Additional interest
  rate risk is the last thing you need to worry
  about.

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• In summary, its a good idea to understand the
  interest rate environment as it pertains to the
  economy as a whole. However, the direct impact
  on most penny stocks is minimal.

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• Finally, its probably a good idea to avoid penny
  stock companies with a large amount of debt.

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