Hello friends,

Welcome to March! Spring seems to be right around the corner. We hope you’re all getting some time in the sunshine as the days get warmer and longer, little by little.

This week, we’re going to explore some possible implications of rising interest rates. Then we’ll let you know about two pieces of news we’ve been following closely: Texas relief efforts and the newly approved Johnson & Johnson vaccine.

As we talked about last week, interest rates and bond yields have gone up. We wanted to highlight four major effects of rising interest rates.

First, borrowing becomes more expensive. Although the Fed’s policy rate doesn’t technically impact consumer (or non-bank) businesses borrowing directly, it is so closely linked to consumer borrowing that we do feel it. Bank loans, credit card interest, and mortgages are likely to increase in concert with the Fed.

Second, deposits will yield more over the long term. Banks take loans from savers in the form of deposits, so the interest accrued in a savings account can also go up over time. That said, banks make their money in part from the difference between their lending and borrowing rates and have little incentive to raise interest rates on savings accounts other than competition with other banks.

Third, stocks and bonds can see some trouble. The value of currently issued bonds will fall if interest rates increase. As far as the stock market goes, it’s a bit less direct. Higher rates can curb buying and spending which can hurt companies’ bottom lines. They also make it more difficult for companies to borrow, which can slow hiring, capital investment, acquisition, and restocking.

Finally, higher interest rates strengthen the value of the dollar because they make investing in the Treasury and other safe, dollar-denominated assets more attractive and capital floods out of other countries and into the US economy. As a result, the dollar gains and has profound implications for trade. It will also make US exports more expensive.

Before we move on to relief in all its forms, we wanted to let you know that the IRS does not plan to extend the 2021 filing season.

We continue to be concerned about the situation in Texas, where blackouts continue and food and water shortages are still affecting the people and animals in the state. If you would like to help, Rolling Stone has aggregated a list of mutual aid organizations that are taking financial donations to help Texans weather this ongoing crisis.

In vaccination news this week, not only has the Johnson & Johnson COVID-19 vaccine achieved FDA approval, but the Biden administration officials told the Washington Post that Merck will partner with Johnson & Johnson on producing and distributing the vaccine. This is a historic moment of competitors in the pharmaceutical industry working together for the public benefit. This could sharply boost the single-shot vaccine availability. The Biden administration will invoke the Defense Production Act to assist Merck in equipping their facilities for the process.

The Johnson & Johnson vaccine has the potential to be a game changer in the fight against COVID-19, as it is a single-dose administration and does not require the sort of freezing temperatures that the Moderna and Pfizer shots do. If you’d like to know more about the similarities and differences between the two types of vaccines, you can read this piece by CNN.

As always, stay healthy and happy, and we’ll see you next week.