Fed may soon get “off zero” but prepare for years more of low interest rates

Here’s my take on interest rates, published earlier today in my Financial Post blog. It’s titled How to deal with rising interest rates: Keep expectations low and prepare for a fall.

The blog makes reference to a road show I’ve been on called An Investor’s Guide to Thriving: How to navigate in a High-debt, Low-growth Bubble-prone World. (Link in red is to the Toronto event this Sunday, which is the final stop on the tour).

But it doesn’t look like this so-called “Financial Repression” is going to let up any time soon.

Organized by ETF Capital Management Inc., most of the speakers on the “Thriving” tour warned the audience (many of them near-retirees) to be prepared for 10 or even 20 years more of minuscule interest rates.

Near-zero interest rates are especially tough on savers and those in the Retirement Risk Zone. Either you settle on no real rate of return at all relative to inflation, or you find yourself taking more risk (i.e. through stocks) than you would prefer.

That’s the dilemma of being in the Retirement Risk Zone and it reflects the dilemma of central banks around the world. Like savers, they too are between a rock and a hard place.