In this February 2020 InvestmentNews article, “Concerns rise about negative bond yields reaching U.S.,” financial advisors speculated about when the next recession would hit and if the Fed would embrace a negative interest rate policy (NIRP). Michael Hennessy, founder and CEO of financial advisory firm Harbor Crest Wealth Advisors in Fort Lauderdale, Florida, agreed that turning to negative rates to battle a recession could be crushing to anyone in or near retirement.
“The issuance of negative-yielding debt would hit the baby boomers the hardest, just as that cohort moves out of the workforce and into retirement,” Hennessy said. “Additionally, banks would need to find creative ways to replace the income they need to generate from their deposits at the Fed. This would likely mean increased fees to consumers, and potentially even negative deposit rates to the average saver.”
But, worst-case scenarios aside, Hennessy believes a recession that would lead to negative rates is not yet a real threat. “There is increased talk, but right now I don’t see a likelihood of a recession,” he said. “The unemployment rate is 3.5 percent, the stock market is at all-time highs. There’s no reason at all to go to negative rates right now.”
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