The stock market had a big day yesterday, and has been generally trending upward for the past week. This relates to bank rates because optimism in the market often translates into higher interest rates. Indeed, bond yields have moved upward lately. So is this the movement bank depositors have been waiting for?
Don’t count on it. The market’s rally has all the earmarks of a mood swing, and thus could be pretty fragile.
In that sense, even the market’s recent success is reason for suspicion. This hasn’t been a steady climb built rationally on a succession of positive economic news items. Rather, the market has lurched forward in big chunks, just as it often lost money in big chunks in May and early June. There have even been occasions when there have been big gains and then big losses throughout the course of a single day.
Notably, all of this has occurred without any particularly meaningful news events. So, the market seems more like it is running on emotion, which makes it especially vulnerable to shocks.
This means that it will take more than sporadic market rallies to get savings account rates, money market rates, and CD rates moving upward. Given the severity of the recent recession and the halting, uncertain nature of the recovery, expect banks to be especially cautious about raising bank rates. National averages may not move upward until there is a clearly-established pattern of strengthening economic data.
That makes this an important time to shop actively for bank rates. Bank policies toward rates will vary greatly in their aggressiveness, so customers need to find the most forward-looking banks.
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