ASX growth shares could be about to go on a growth rampage if trade wars continue.
All assets in the world are somewhat valued based on the interest rates at the time provided by central banks. In Australia our central bank is called the Reserve Bank of Australia (RBA) headed by Governor Philip Lowe and in the United States it’s called the Federal Reserve headed by Chairman Jerome Powell.
Why Do Interest Rates Matter?
Interest rates act like gravity on asset valuations. As interest rates go higher, it brings down the valuation. If interest rates go lower it allows valuations to rise in response.
Over the past few years we have seen the US Federal Reserve increasing its interest rate, which has rightfully put dampeners on valuations.
However, we might be about to enter a new era of decreasing interest rates. I’m sure you heard that the RBA just decreased its interest rate by 0.25% to 1.25%.
The US Fed Chairman has signalled that the world’s largest economy may also start decreasing interest rates if the trade war starts to hurt the US economy.
The US Administration has often gloated that China is filling the US coffers with money from the tariffs, but it’s the US business that actually pay the tariffs and they’ll pass on the cost to end-customers if possible.
Federal Reserve Vice Chairman Richard Clarida said to CNBC: “We will put in policies that need to be in place to keep the economy, which is in a very good place right now, and it’s our job to keep it there.
If interest rates go lower it could push the valuations of growth shares and income shares up over the next year. Alphabet, Facebook, Amazon, Afterpay Touch Group Ltd (ASX: APT), WiseTech Global Ltd (ASX: WTC), Transurban Group (ASX: TCL), Goodman Group (ASX: GMG) and many others could receive a boost from any Fed interest rate cuts.
That’s why I’m focusing on the proven ASX shares in the FREE REPORT below that could keep growing in most economic circumstances.
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.