Throughout 2001, the Federal Reserve has cut interest rates to the lowest levels in years. That has spurred a tremendous increase in mortgage refinancing, which will help the stock market prospects of companies in that industry.
Low interest rates also may help consumer finance companies, including credit card issuers. There had been a great deal of concern that these companies would be hurt by consumer defaults and bankruptcies, in a recession, but lower interest rates will permit more consumers to pay off their balances.
Some mortgage and consumer finance companies still sell at depressed levels, making their stocks attractive. With their stock prices down, larger financial institutions might look at such companies as acquisition candidates.
What’s more, if Americans travel less this year, the money not spent on a trip to Europe may go into home remodeling, which also bodes well for consumer finance companies. They’re the ones that will be providing the cash to Americans who are determined to be safe at home.
