The Problem with Central Banks
At 2:00 PM next Tuesday, Jerome Powell sits in front of the camera and says four words: "We are raising rates" or "We are holding." That's it. Four words decide whether your ETF is up or down tomorrow.
It sounds insane — but that's exactly how it works.
Why Interest Rates Move Your Portfolio
Here's how it functions (no jargon):
Scenario 1: Rates Go Up The Fed says: "We're raising the base rate by 0.25%." What happens?
- Your bonds immediately become more valuable (old bonds pay less than new ones = price rises).
- But tech and growth stocks (Apple, Nvidia, Tesla) fall — because their future profits are worth less when money gets expensive.
- An ETF with 60% tech exposure? It drops 3-5%.
Scenario 2: Rates Stay the Same The Fed says: "Status quo." Markets exhale. Why? Because many investors expected a hike. When relief comes, they buy again — prices rise 2-4%.
What This Means for Your Money
Daniel's example: My daughter Lena invested €10,000 in a world ETF two weeks ago. Her first investment. I told her: "If the Fed raises next week, your portfolio will temporarily drop by €300-500. That's NOT real — that's just the market getting nervous. Leave it alone."
That's exactly the lesson: Central banks set the tone, but long-term winners are those who stay put.
My T-stock wound taught me that. I went into DAX funds in 2000, the New Market crashed, I panicked and sold. If I'd stayed put, the curve would have recovered within 5 years. But I let short-term fears get too big.
The Fed decides next week. No matter what they say: If your ETF is a solid setup, one meeting doesn't change that.
What Happens Now
- Monday 15 Sep, 2:30 PM Jobless Claims (the final inflation data before the Fed)
- Wednesday 16 Sep, 8:00 PM Fed Decision
- Thursday 17 Sep, morning post-analysis (who was right)
If the numbers tomorrow are surprisingly bad, the Fed is more likely to hold. If good: probably raising. That's the game.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results.