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Valued Social Butterfly
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Re: How Do Interest Rates Affect the Stock Market?

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Message 11 of 17

@Olderscout66 wrote:

The theory is that higher interest rates lowers borrowing and slows the economy so inflation doesn't become a problem. Inflation becomes a problem when demand outstrips supply driving prices up, but if the demand is "tempered" with higher interest on borrowing, the supply can increase to meet the demand and the economy grows without inflation. Trump has no idea how this works and thinks it caused the stock markets to tank, but stock markets rise and fall based on the interaction of around 100 trading algorithms and the attitude of 100 large investment fund traders, which cannot predict the future but are much better than the average citizen at realizing what's already happened.

 

In the present case, they've realized GOPers elected an infantile nincompoop POTUS and his trade wars have done serious damage to the Obama Recovery after the jrbush Depression. His only effect on the economy in the last 23 months has been 100% negative by adding uncertainty every time he twitters his tweets.


But - all those GOPerLords, Oligarchs, 1%ers, and tax payers are losing money - isn't that a good thing??

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Valued Social Butterfly
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Re: How Do Interest Rates Affect the Stock Market?

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Message 12 of 17

The theory is that higher interest rates lowers borrowing and slows the economy so inflation doesn't become a problem. Inflation becomes a problem when demand outstrips supply driving prices up, but if the demand is "tempered" with higher interest on borrowing, the supply can increase to meet the demand and the economy grows without inflation. Trump has no idea how this works and thinks it caused the stock markets to tank, but stock markets rise and fall based on the interaction of around 100 trading algorithms and the attitude of 100 large investment fund traders, which cannot predict the future but are much better than the average citizen at realizing what's already happened.

 

In the present case, they've realized GOPers elected an infantile nincompoop POTUS and his trade wars have done serious damage to the Obama Recovery after the jrbush Depression. His only effect on the economy in the last 23 months has been 100% negative by adding uncertainty every time he twitters his tweets.

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Treasured Social Butterfly
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Re: How Do Interest Rates Affect the Stock Market?

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Message 13 of 17

@KidBoy2 wrote:
From your link Mick...thanks!

Davis noted this might be counterintuitive, as “many investors believe that rising interest rates are a harbinger of poor stock returns,” adding that “they have some solid reasons for thinking that,” including that higher rates make bonds relatively more attractive, and that they can slow overall economic growth, a headwind for corporate profits. “Financially savvy investors might also note that higher interest rates lower the value of future corporate earnings, thereby reducing their present value,” he added.

If you can get 8% at little risk, why would you risk losing value on the chance of getting 9%.  On the other hand, if you get 2% with no risk,  it makes more sense to risk your investment to get an 8% return.  Higher interest rates also depress the economy thus projecting a lower return on stocks. 

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Re: How Do Interest Rates Affect the Stock Market?

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Message 14 of 17

@KidBoy2 wrote:
From your link Mick...thanks!

Davis noted this might be counterintuitive, as “many investors believe that rising interest rates are a harbinger of poor stock returns,” adding that “they have some solid reasons for thinking that,” including that higher rates make bonds relatively more attractive, and that they can slow overall economic growth, a headwind for corporate profits. “Financially savvy investors might also note that higher interest rates lower the value of future corporate earnings, thereby reducing their present value,” he added.

If you got a return on your Investments 10 out of 11 times the Interest Rates went up

 

But you lost money every time Trump made a move

 

Where do think most reasonable people are going to come down on this issue?

 

 

 

 

 

 

( " China if You're Listening - Get Trumps Tax Returns " )

" )
" - Anonymous

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Re: How Do Interest Rates Affect the Stock Market?

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Message 15 of 17
From your link Mick...thanks!

Davis noted this might be counterintuitive, as “many investors believe that rising interest rates are a harbinger of poor stock returns,” adding that “they have some solid reasons for thinking that,” including that higher rates make bonds relatively more attractive, and that they can slow overall economic growth, a headwind for corporate profits. “Financially savvy investors might also note that higher interest rates lower the value of future corporate earnings, thereby reducing their present value,” he added.
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Re: How Do Interest Rates Affect the Stock Market?

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Message 16 of 17

@KidBoy2 wrote:

https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/

 

One part of the link...

 

The Bottom Line

Although the relationship between interest rates and the stock market is fairly indirect, the two tend to move in opposite directions: as a general rule of thumb, when the Fed cuts interest rates, it causes the stock market to go up; when the Fed raises interest rates, it causes the stock market as a whole to go down. But there is no guarantee how the market will react to any given interest rate change the Fed chooses to make.

 

===========================================================

 

The President does not control the FED Mick!


 

 

WHAT A CROCK - Kidboy

 

According to Vanguard, periods of rising rates almost always coincide with market gains, even if the move higher in stocks is typically modest.

 

The asset-managing giant looked at data covering the past 50 years, which included 11 periods where the Fed raised rates. The market rose in 10 of the 11 periods, as seen in the following chart.

 

 

Stock Market Increases During Rate Increases.png

 

 

 

 

Source - https://www.marketwatch.com/story/why-stock-investors-shouldnt-fear-rising-interest-rates-in-one-cha...

 

 

 

( " China if You're Listening - Get Trumps Tax Returns " )

" )
" - Anonymous

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How Do Interest Rates Affect the Stock Market?

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Message 17 of 17

https://www.investopedia.com/investing/how-interest-rates-affect-stock-market/

 

One part of the link...

 

The Bottom Line

Although the relationship between interest rates and the stock market is fairly indirect, the two tend to move in opposite directions: as a general rule of thumb, when the Fed cuts interest rates, it causes the stock market to go up; when the Fed raises interest rates, it causes the stock market as a whole to go down. But there is no guarantee how the market will react to any given interest rate change the Fed chooses to make.

 

===========================================================

 

The President does not control the FED Mick!

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