OK, it may sound crazy, but interest rates are not related to stock prices. This is one of my latest findings after more than 30 years of studying the markets.
Wait, do not jump to conclusions. This is what I found.
Rising interest rates may have two different meanings depending on the economic and financial environment.
Interest rates rise because of an improving economy stimulated by ample liquidity.
Or, interest rates rise because of a strong economy and decreasing liquidity.
The first scenario is favorable to stocks. The second is not.
More, much more when you subscribe to The Peter Dag Portfolio on https://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
1 comment:
Interesting observation on the two scenarios. There is also a strong evidence that interest rates average trends drive stock market - see the inverse correlation over 57 years on chart at http://www.businesscycleinvestor.com/methodology.htm
It seems a "buy & hold" strategy that worked so well over the last 27 years, due to predominantly falling interest rates environment, will not work as well in the future.
I enjoy your comments George.
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