Stocks don’t rise or fall because of interest rates

  • 📰 FinancialReview
  • ⏱ Reading Time:
  • 63 sec. here
  • 3 min. at publisher
  • 📊 Quality Score:
  • News: 28%
  • Publisher: 90%

United States News News

United States United States Latest News,United States United States Headlines

The markets have been spooked by talk of interest rate rise but are quite likely to shrug it off or even put a positive spin on it.

With the Federal Reserve poised to raise short-term interest rates to fight inflation, more than a few investors worry that higher rates will sink stocks. But there’s just as much reason to think the opposite will happen.

It happened again when the Fed dropped rates near zero in the aftermath of the financial crisis and kept it there for years, triggering one of the longest bull markets in history. And it happened a third time when the Fed lowered rates back near zero in response to the pandemic last spring, causing broad stock market averages to double in just more than a year.

There have been many times when interest rates and stock valuations have been simultaneously above or below average, bucking the idea that interest rates necessarily push stocks in the opposite direction. The two exceptions were a brief rate hike campaign in 1971 in which the market declined 2 per cent, and a longer one soon thereafter from 1972 to 1974 in which the market declined 26 per cent. The latter episode coincided with an oil embargo that tipped the economy into a long recession, so it’s hard to know how much to blame rising interest rates for the selloff.

The 1970s was an outlier in another way. Higher inflation is more often associated with a strong economy than a weak one, which is one reason why the combination of high inflation and a weak economy during the 1970s is so memorable. It’s a mistake to learn too much from that experience.

We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 2. in US
 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.

If you say so.

LOOLLLLL

United States United States Latest News, United States United States Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

US stocks storm back from rout to close higherDip buyers flooded into the market in afternoon trade, fully reversing an earlier 4 per cent drop in the S&P 500.
Source: FinancialReview - 🏆 2. / 90 Read more »

US stocks plunge in choppy tradingGlobal equity markets tumbled, with the S&P 500 poised to enter correction territory. ASX futures fell 235 points or 3.3 per cent to 6817 as of 4.03am AEDT. Follow updates here.
Source: FinancialReview - 🏆 2. / 90 Read more »

US stocks sell-off as Fed dread deepensAll three major US benchmarks were lower in late morning trade on renewed, volatile selling. US bonds were steady. Gold, oil, iron ore and bitcoin were higher.
Source: FinancialReview - 🏆 2. / 90 Read more »