“While the stock market has been reaching all-time highs in recent weeks, those numbers are deceiving. Many experts believe that stock markets are in a bubble, and that the markets are on the verge of a crash. Bond markets, too, have been in a years-long bubble because of trillions of dollars of central bank bond purchases. Once central banks stop buying (and they will), the bond bubble will collapse too.” -Ron Paul, Former U.S Presidential Candidate
The recent announcement from the Federal Reserve that it plans to shrink its balance sheet has got some investors nervous that interest rates may be about to significantly increase. This creates a substantial risk for those who are invested in rate-sensitive products, particularly ETFs and mutual funds that invest in companies that borrow extensively.