Month: May 2022

The AMP Ltd (ASX: AMP) share price has recovered from an early sell-off after the company posted its update for the quarter ended March.

Within the update, it was revealed Woolworths Group Ltd (ASX: WOW) had ended its contract with AMP for corporate superannuation services.

The move is likely to drain another $4 billion from AMP’s funds under management sometime in the first half of 2023.

AMP shares withstanding the bad news

It comes on top of the outflows of $1.3 billion in the first quarter of 2022 from its Australian Wealth Management (AWM) division.

This caused AWM’s assets under management (AUM) to drop to $136.5 million in the quarter from $142.3 million in Q1 2021. The decline isn’t just caused by the outflows but by investment losses too.

Loss of clients was also an issue for the AMP Capital division. Its normalised AUM dipped 0.6% to $52.5 billion in the quarter compared to the previous quarter.

This was largely due to client redemptions from China Life AMP Asset Management money market funds.

Dip buyers supporting the AMP share price

The news initially sent the AMP share price lower, but investors have taken a glass-half-full view. The shares are currently trading 1.85% higher at $1.212 compared with a 0.63% advance by the S&P/ASX 200 Index (ASX: XJO).

Management reassured investors that the loss of the Woolworths contract would not have a material impact on group profitability.

While the cash outflow from AWM in the latest quarter isn’t great news, it’s an improvement from the $2 billion in outflows the embattled group reported in the same period last year.

AMP winning mortgage market share

What’s more, AMP Bank managed to grow its mortgage business by twice the pace of the industry. Its total loan book increased by $500 million to $22.6 billion in the first three months of the year despite intense competition.

Its super and investment platform business, North, is also growing. Inflows from external financial advisers increased by 53% to $342 million during the period compared to Q1 2021.

What did management say?

Commenting on the update which appears to be fuelling the AMP share price today, chief executive Alexis George said:

We’re seeing positive signs of growth and momentum and have set a clear path to accelerate the transformation of AMP Limited with the announcement of the sale of Collimate Capital’s real estate and infrastructure equity businesses, enabling an increased focus on the growth of our retail banking and wealth businesses.

With the transactions we announced last week, we have set AMP up for a strong and sustainable future, with a clear strategy to grow AMP Bank and our wealth management businesses in Australia and New Zealand.

AMP recently announced the sale of some of its businesses. The group could reap up to circa $2 billion in cash from the divestments, which may be used to fund capital returns.

The AMP share price is up 24% over the past month and 21% this year to date.

The post AMP share price rebounds as Woolworths ends $4b superannuation contract appeared first on The Motley Fool Australia.

More reading

• How is the AMP share price looking in May?
• What rising interest rates can do to ASX shares
• The AMP share price soared 21% in April. Here’s why
• These were the best performing ASX 200 shares in April
• These were the best performing ASX 200 shares last week

Motley Fool contributor Brendon Lau has positions in AMP Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The AGL Energy Limited (ASX: AGL) share price had a roaring month in April despite a major fault at the company’s Loy Yang A power station.

Fortunately, there was plenty of good news to balance out the bad from the energy producer and retailer.

The AGL share price ended last month trading at $8.68, 12.44% higher than it was at the final close of March.

For comparison, the S&P/ASX 200 Index (ASX: XJO) slipped 0.86% over the course of April.

Let’s take a closer look at what boosted sentiment for the previously embattled ASX 200 share last month.

Why did the AGL share price outperform in April?

The AGL share price outperformed the ASX 200 by nearly 12% last month despite only releasing unfortunate news to the market.

The company’s major coal-fired power station, Loy Yang A, experienced an electrical fault resulting in one of its units being shut down. The company warned the outage could continue until August.

Some brokers predict the incident could bring a $70 million dint to AGL’s earnings and force the company to buy energy from the pool — a costly exercise in 2022.

The AGL share price tumbled 3% on the back of the news.

Luckily, there was plenty of good, non-price-sensitive news to bolster sentiment in the company in April.

It announced it was shutting down one of four units at its Liddell coal-fired power station early last month. It’s the first step towards closing the station completely next year.

Additionally, it shook on a deal that will see it operating a grid-scale battery in the ACT. It also entered another that will see coal ash from its Bayswater power station transformed into bricks.

Finally, AGL announced last week it will be acquiring biogas plant provider Energy360.

The energy giant believes the acquisition will help it provide high-emissions businesses with sustainable energy solutions.

Of course, May so far has been rocky for AGL and its share price. On top of that, the market’s expecting to hear more news from the company in coming weeks.

It’s set to provide additional details on its upcoming demerger – despite increasing pressure on shareholders to vote against the plan – in mid-May.

Today, AGL boss Graeme Hunt hit back at tech billionaire Mike Cannon-Brookes’ criticism of the demerger, labelling some of the claims being made against the plan as “false”.

The post Here’s why the AGL share price was cooking with gas in April appeared first on The Motley Fool Australia.

More reading

• Own AGL shares? Boss says Cannon-Brookes made ‘false claims’
• When, why, how? All the details on the AGL demerger and what might happen if it flops
• Own AGL shares? Boss slams Cannon-Brookes’ plan as ‘transition into a nosedive’
• AGL share price dips despite $2 billion energy transition deal
• Why AGL, Booktopia, Cleanaway, and Corporate Travel Management shares are dropping

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Appen Ltd (ASX: APX) share price rollercoaster continues on Thursday with the stock recovering its losses for the week so far.

There’s been no news from the provider of data for artificial intelligence to explain today’s surge. However, it’s also a good day for many of its ASX technology peers.

At the time of writing, the Appen share price is $6.73, up 4.83% on its previous close.

For context, the S&P/ASX All Ordinaries Index (ASX: XAO) is also in the green, having gained 0.7%.

Let’s take a look at what might be going on with ASX tech shares on Thursday.

Appen share price up alongside ASX tech share peers

The S&P/ASX All Technology Index (ASX: XTX) is up 1.53% at the time of writing. Some of the big-name ASX tech shares doing well today include Megaport Ltd (ASX: MP1), up 3.33%, and WiseTech Global Ltd (ASX: WTC), up 4.1%.

Among the smaller ASX tech shares soaring today is Whispir Ltd (ASX: WSP), up 7.02%, and Dubber Corp Ltd (ASX: DUB), up 7.31%. Nuix Ltd (ASX: NXL) is also up 6.96%.

The market hasn’t heard any price-sensitive news from Appen since early March but its share price has been displaying volatility lately. It fell 4.5% on Monday and gained it back on Tuesday. It slumped another 3.4% yesterday before lifting back into the green today.

Though, Appen’s good days this week are nowhere near enough to outweigh its bad year. The Appen share price is 39% lower than it was at the start of 2022. It has also tumbled 54% since this time last year.

Appen has a market capitalisation of $792 million and has 123.4 million shares outstanding.

The post The Appen share price is soaring 5% on Thursday. Could this be why? appeared first on The Motley Fool Australia.

More reading

• What would happen if Appen shares were removed from the ASX 200? 
• 3 stellar ASX growth shares analysts are tipping as buys this month
• These were the worst performing ASX 200 shares in April
• Leading brokers name 3 ASX shares to buy today
• Why are ASX tech shares having such a dire run on Monday?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd, Dubber Corporation, MEGAPORT FPO, Whispir Ltd, and WiseTech Global. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nuix Pty Ltd. The Motley Fool Australia has positions in and has recommended Dubber Corporation and WiseTech Global. The Motley Fool Australia has recommended MEGAPORT FPO and Whispir Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) ended up having a pretty wild month over April. Over the month just gone, the ASX 200 got fairly close to breaking its all-time high before retreating towards the end of the month. In the end, the index gave investors a loss of 0.86% over the month just gone. But let’s see how the Woolworths Group Ltd (ASX: WOW) share price went.

As the largest consumer staples share on the ASX 200, many investors have an expectation of ‘safety’ for Woolworths shares. So it will be interesting to see how this grocery giant lived up to this reputation.

So Woolies started April at a share price of $37.26. By the end of the month, the Woolworths share price had grown to $38.51. That’s a gain of 3.35%, a very healthy outperformance of the broader market. And that’s not including the interim dividend investors received last month either. Woolies paid out its dividend of 39 cents per share, fully franked, on 13 April. This would have added another couple of percentage points to shareholders’ April returns too.

All in all, a relatively pleasing month for the Woolworths share price, you’d have to conclude.

Is the Woolworths share price a buy or a sell in May?

So now that April is under the old belt, and we’re now in May, many investors might be wondering if the Woolworths share price is a buy today.

Well, let’s see what one ASX broker reckons.

As my Fool colleague James covered just yesterday, broker Goldman Sachs is currently bullish on Woolies shares. This ASX broke currently rates Woolworths as a buy, with a 12-month share price target of $41.70. That would imply a further upside of almost 10% on current pricing over the next year.

Goldman was impressed with Woolworths’ latest quarterly update, which saw the company report year-on-year sales growth of 9.7%. The broker also noted that Woolies “gained market share both from value and volume perspective during the quarter”. Goldman is also anticipating that Woolworths will lift its dividends in FY2023 as well to $1.18 per share.

So more good news to come for Woolies if Goldman Sachs is to be believed.

At the current Woolworths share price, this ASX 200 blue-chip has a market capitalisation of $46.14 billion, with a dividend yield of 2.47%

The post Here’s how the Woolworths share price stacked up in April appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: NAB disappoints, Qantas announces acquisition
• 5 things to watch on the ASX 200 on Thursday
• Here are the top 10 ASX shares today
• How is the AMP share price looking in May?
• Wesfarmers share price slips as Bunnings competition heats up

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Liontown Resources Limited (ASX: LTR) share price is leaping higher today, up 5.9%.

Liontown shares closed yesterday trading for $1.36 and are currently worth $1.44.

So, why are investors bidding up the price of the ASX lithium producer?

Lithium shares in the spotlight

It’s not just the Liontown share price that’s outperforming today.

Many of the other top ASX lithium shares are charging higher too. Core Lithium Ltd (ASX: CXO) shares, for example, are up 6.7% at the time of writing while the Pilbara Minerals Ltd (ASX: PLS) share price is up 5%.

With no fresh price-sensitive news out of the company, it looks like investors are broadly keen on the lithium space.

And as a producer, Liontown is able to take advantage of the soaring spot prices for lithium. Those prices have surged some 500% over the past 12 months as demand for the lightweight, conductive metal used to power EV batteries has outpaced new supply.

Liontown was said to be among the ASX lithium companies in “a very strong position” by David Franklyn, portfolio manager of the Argonaut Natural Resources Fund.

According to Franklyn (courtesy of the Australian Financial Review)

We look out for large companies that are in tier-one locations, have a large resource base, are in production and also have the ability to further grow production. The guys who maximise the benefit of those higher prices are the ones that are in production today and don’t have everything locked away in long-term contracts because you need to be able to sell near spot [prices].

Liontown Resources counts among the Argonaut Natural Resources Fund’s top-3 ASX lithium share holdings.

Liontown share price snapshot

The Liontown share price is up an impressive 251% over the past 12 months, far outpacing the 4% gains posted by the All Ordinaries Index (ASX: XAO) in that same period.

The ASX lithium share hit all-time closing highs of $2.12 on 4 April.

The post Up 250% in a year, the Liontown share price surges 6% higher again today appeared first on The Motley Fool Australia.

More reading

• Top brokers explain why not all ASX lithium shares are created equal
• Liontown Resources share price tumbles despite lithium update
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why is it such a mixed day of trade for ASX lithium stocks?
• What are the 10 biggest ASX shares in the lithium space

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Webjet Limited (ASX: WEB) share price is an investment to consider as travel demand returns to the market.

It has been a difficult period for Webjet since the onset of the COVID-19 pandemic. The Webjet share price is still down around 40% compared to the pre-COVID crash, though there are a significant amount of more shares on issue now after the capital raising.

Travel demand returns

Webjet is due to hand in its FY22 result on 19 May 2022. However, investors may have gotten an insight into travel demand from a recent update from Qantas Airways Limited (ASX: QAN).

The airline said that domestic travel has returned to pre-COVID levels ahead of expectations. Qantas also said that there is “strong demand” for international travel, though some key markets are yet to open.

Qantas said that leisure demand is “very strong”. Qantas and Jetstar both were operating at approximately 110% of pre-COVID capacity over the Easter school holidays. It also said that the rebound in travel for business purposes was “above expectations”. Small business travel was above pre-COVID levels and corporate travel was 85% of pre-COVID travel.

The airline also noted that the removal of Australia’s pre-flight testing requirement and early opening of New Zealand’s borders provided tailwinds during April.

Does this make the Webjet share price a buy?

Webjet and Qantas are not the same business. Demand for one business may not equally translate into the same demand growth for the other business, Webjet may be seeing less (or more) demand than Qantas over the same period.

However, Webjet investors may think that it’s useful to know about the conditions that Qantas is seeing.

One of the most recent broker ratings on Webjet came from Citi. It currently rates Webjet as a buy, with a price target of $6.50. The operating leverage that Webjet has with its business model will help profitability as volume returns.

The broker is expecting that Webjet can grow its market share, particularly as more people purchase their travel through online means.

According to Citi, the Webjet share price is valued at 33 times FY23’s estimated earnings, implying profit will return in FY23.

Ord Minnett has one of the most positive price targets, with a target of $7.51. That’s a potential upside of almost 30%.

Webjet’s latest commentary

Half a year ago, Webjet said that its WebBeds business had been profitable since July 2021, while the Webjet online travel agency (OTA) business returned to profitability in October 2021.

Webjet said that it has expanded its geographic presence in the “key” North American market, added significant domestic inventory globally, and signed a range of new domestic and OTA customers, “resulting in a materially larger opportunity for growth than was targeted pre-COVID.”

Webjet also said that it sees an opportunity to increase market share in the OTA business as consumers continue to shift to buying online and believes the innovations offered by ‘Trip Ninja’ technology will play a key role in growing its share of the international flights market.

Webjet said that WebBeds is on track to be 20% more cost-efficient at scale.

Webjet share price snapshot

Since the start of 2022, the Webjet share price has climbed almost 10%.

The post Is the Webjet share price now a buy amid ‘strong’ travel demand? appeared first on The Motley Fool Australia.

More reading

• Why did the Webjet share price have such a good run in April?
• Why is the Webjet share price beating the ASX 200 today?
• These are the 10 most shorted ASX shares
• Why is the Webjet share price flying higher on Friday?
• Why are ASX 200 travel shares having a first-class end to the week?

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Cobalt Blue Holdings Ltd (ASX: COB) share price has taken a hit these past few weeks.

After a strong start to 2022 – shares are up 60% this year to date – the Cobalt Blue share price swept 10% into the red during April.

In the first part of this week, the shares fell another 12% between Friday’s close and Wednesday’s close. However, they have rebounded today and are currently up 6.67% at 80 cents.

What’s been happening at Cobalt Blue?

April was a fairly quiet month for the miner. Early on, investors bid up its share price amid an update to its Broken Hill Cobalt Project (BHCP), released the month earlier.

By that time, Cobalt Blue had surged 79% in the month to April 5, propelled by a substantial lunge in the price of cobalt.

These pricing strengths have extended into today’s market, holding the line at over $80,000 per tonne.

“Cobalt futures were hovering above the $80,000 per tonne level in May, their highest since June 2018 and up 16% this year and around amid continued strong demand from the electric vehicle sector,” Trading Economics reports.

On the supply side, cobalt production has been pushed to its limits as any nation producing electronics is a cobalt buyer. On top of that, mounting sanctions on Russia, which account for roughly 4% of the world’s cobalt production, for invading Ukraine intensified concerns over the commodity’s supply.

Aside from that, the company was awarded a $15 million critical minerals accelerator initiative grant in late April, after a relatively quiet month.

“The Broken Hill Cobalt Project has received a significant boost by being awarded $15 million via the Australian Government’s Critical Minerals Accelerator Initiative,” chairman Rob Baincardi said.

“We applaud the Australian Government’s support in assisting mid-stage critical minerals projects overcome the substantial technical, regulatory and financial barriers for the establishment of greenfield projects such as the BHCP.”

That announcement came a day after the company’s quarterly activities and cash flow report.

Cobalt Blue share price snapshot

The Cobalt Blue share price has soared 128% higher in the last 12 months of trade, although has struggled in more recent times.

Over the past month, shares have slipped 20%, coming off a three-month high of $1.03 on 4 April.

The post Why did the Cobalt Blue share price come off the boil in April? appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: NAB disappoints, Qantas announces acquisition
• Here’s why the Magnis share price is charging higher today
• The Federal Reserve just raised interest rates — what does it mean to investors?
• Airtasker share price dives 6% as trading resumes
• Alliance share price rockets 24% on Qantas takeover news

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At lunch on Thursday, the S&P/ASX 200 Index (ASX: XJO) has followed the lead of US markets and is pushing higher. The benchmark index is currently up 0.65% to 7,352.5 points.

Here’s what is happening on the ASX 200 today:

NAB half-year results disappoint

The National Australia Bank Ltd (ASX: NAB) share price is in the red today after the bank’s half-year results disappointed. For the six months ended 31 March, NAB reported a 4.6% increase in revenue to $9,071 million and a 4.1% lift in cash earnings to $3,480 million. However, this was short of the market’s expectations. Furthermore, NAB has abandoned its cost base targets and now expects its operating expenses to increase by 2% to 3% in FY 2022.

Janus Henderson shares crash

Investors have been selling down the Janus Henderson Group (ASX: JHG) share price on Thursday after the fund manager’s quarterly update underwhelmed. Janus Henderson reported first quarter operating income of US$124.6 million. This was down 21% from the fourth quarter and 35.3% over the prior corresponding period.

Qantas acquisition

The Qantas Airways Limited (ASX: QAN) share price is falling today after the airline operator announced an agreement to acquire Alliance Aviation Services Ltd (ASX: AQZ). The company has offered one Qantas share per Alliance share. This represents a 35% premium to the $3.51 Alliance share price at yesterday’s close and values the fly-in, fly-out operator at an enterprise value of $919.2 million.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Thursday has been the Imugene Limited (ASX: IMU) share price with a 7% gain. The biotech’s shares are rebounding after crashing to a 52-week low this week. Going the other way, the Janus Henderson share price is the worst performer with a 15% decline. This follows the fund manager’s aforementioned quarterly update.

The post ASX 200 midday update: NAB disappoints, Qantas announces acquisition appeared first on The Motley Fool Australia.

More reading

• Here’s all what you need to know about the latest NAB dividend
• NAB share price tumbles on earnings miss and costs outlook
• Qantas share price stalls amid Alliance Aviation acquisition
• NAB share price on watch amid $3,480 million half-year cash profit
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Magnis Energy Technologies Ltd (ASX: MNS) share price is getting a big lift today.

Up almost 10% in early morning trade, Magnis shares are currently up 4.9%, trading for 43 cents.

So, what’s driving investor interest in the ASX lithium-ion battery tech company today?

‘Truly remarkable’ battery test results announced

The Magnis share price is surging after the company reported promising results for its CSPG (Coated Spherical Graphite) high-performing green anode materials.

The green anode product was produced solely via mechanical processes, without chemical, acid, or thermal purification.

The electrochemical battery performance of Magnis’ Nachu CSPG anode was tested and qualified using commercial graded Lithium-ion battery cells. The full cells have had more than 1,000 cycles and retain at least 90% of their initial capacity.

Magnis said the results show “an excellent lifespan” for its Nachu CSPG anode material. It is now ready for the next step of commercialisation.

Magnis produced ultra-high purity (+99%) natural flake graphite (NFG) concentrate from its wholly-owned Nachu Graphite Project in Tanzania without chemical purification. It said the unique characteristics of its Nachu NFG ore enabled it to produce ultra-high purity (+99.95%) CSPG anode product with a high yield.

Commenting on the positive results, Magnis chairman Frank Poullas said:

We are blessed with such an amazing resource. Being able to produce a high quality, high performing green anode product at +99.95% purity or above without any acid, chemicals or thermal purification while using mechanical processes only, is truly remarkable.

Magnis share price snapshot

Over the past 12 months, the Magnis share price has gained 26%. By comparison, the All Ordinaries Index (ASX: XAO) is up 4% since this time last year.

For Magnis shareholders, 2022 has been tough with the battery tech company down 25% year-to-date.

Magnis has a market capitalisation of $396 million with 965.8 million shares on issue.

The post Here’s why the Magnis share price is charging higher today appeared first on The Motley Fool Australia.

More reading

• Why is the Magnis share price tumbling 5% on Wednesday?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

As was widely anticipated, the Federal Open Market Committee (FOMC), which is the policy-making arm of the Federal Reserve, announced a 50-basis-point hike to the federal funds rate. Since a basis point is equal to 0.01 percentage points, this means that the benchmark rate has risen from a target range of 0.25%-0.50% to 0.75%-1.00%.

If you didn’t fully understand that first paragraph or what it means to you, don’t worry. Here’s a rundown of what this rate hike means in simple terms, what it could mean for investors, and what to expect going forward.

Here’s what the Fed’s rate hike means

The Federal Open Market Committee has two main functions — to maximize employment and control inflation. And with the unemployment rate sitting at a low 3.6%, the clear goal of this move was to get inflation in check — after all, inflation is running at its highest rate in four decades, and many consumers are feeling the pain.

Without getting too deep into the weeds on an economic discussion, the general idea is that higher interest rates help slow down economic activity. However, raising interest rates too fast can result in a major shock to the economy, so the Fed tends to raise rates incrementally (like it did today) to gradually slow down inflation closer to the Fed’s 2% target.

For consumers, the important thing to know is that some interest rates that affect Americans are directly tied to the federal funds rate. For example, if you have a credit card, you can bet that its standard interest rate for purchases will rise by 0.50% in response to the Fed’s latest move. Adjustable-rate mortgages and HELOCs are other types of interest rates that typically move according to the benchmark.

On the other hand, fixed-rate mortgage interest rates and auto loan rates, among others, are not directly tied to the Fed’s moves. After all, the average 30-year mortgage rate has already increased from 3.29% to 5.55% since the end of 2021, despite the FOMC only raising rates by 0.25% in that time. And for savers, the interest rates you get paid on savings deposits aren’t tied to benchmark rates either.

What could it mean to investors?

When it comes to the rate hike itself, the impact on your investments is likely to be minimal. This was a widely expected rate hike and was already priced into the market. Sure, if a company relies heavily on borrowed money that happens to be tied to the federal funds rate (like a credit line), it could have a bit of an impact on interest expense, but there’s a reason the stock market barely budged after the rate hike was announced — the market saw it coming.

What to expect going forward

Here’s the most important takeaway for investors. It’s not what the Fed just did that moves markets. It’s what the Fed is expected to do next.

According to the CME Group‘s (NYSE: CME) FedWatch tool that analyzes futures markets, the current expectation is for another 75-basis-point rate hike when the FOMC meets in late June. By the December meeting, the current median expectation is for a federal funds rate of 3%-3.25%. And in a year from now, at next May’s meeting, the most likely scenario is currently seen as a target range of 3.5%-3.75%. If these expectations change significantly in the months leading up to future meetings, it could certainly have a big impact on markets.

It’s also important to pay attention to commentary by Fed officials, particularly FOMC Chair Jerome Powell. His speeches have the ability to quickly alter the market’s expectations about future rate hikes.

The bottom line is that this rate hike was widely expected, but there’s a wide range of potential outcomes going forward. It depends on how aggressive the FOMC wants to get, and how quickly inflation starts to cool off in response to rising interest rates.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post The Federal Reserve just raised interest rates — what does it mean to investors? appeared first on The Motley Fool Australia.

More reading

• ASX 200 midday update: NAB disappoints, Qantas announces acquisition
• Here’s why the Magnis share price is charging higher today
• Airtasker share price dives 6% as trading resumes
• Alliance share price rockets 24% on Qantas takeover news
• Here’s all what you need to know about the latest NAB dividend

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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