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Re: How Do Interest Rates Affect the Stock Market?

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@rk9152 wrote:

 

Did you read the post you were theoretically responding to?


Just the headline.  I assumed it was another time the right had no idea how the capital markets worked. After all, Trump keeps trying to blame the effects of all those dreadful economic decisions on the head of the Fed when it is the chaos and lack of any sort of economic policy which is driving markets into the ground. 

 

 

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Re: How Do Interest Rates Affect the Stock Market?

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Message 2 of 17

@Richva wrote:

@rk9152 wrote:

It is still confusing. When  the market is up that is bad because those nasty ol' 1%ers are getting rich. Yet when the market is down, it's still bad because retirees are losing. I would think that those retirees would be happy when it is up (regardless of the Party of the President).


I can certainly see why it would be confusing to anyone with absolutely no grasp of how capitalism or markets work.  I can see by your assumptions that you think this is some kind of popularity contest when it is really more about assumptions for the future based on the current actions. Short term (!!) interest rates were raised  1/4 of a percent so if people were moving money out of stocks (long term investments) because of the interest rate hike, they would have been weighing that as 1,600 times the rate increase for Friday alone. Seems high unless you can factor in another issue such as.........Trump's willingness to close the government. Trump's willingness to start a trade war, Trump's inability to abandon our military (and economic) allies, and Trump's inability to keep on any one policy track past the last conservative talk radio show. 

 

Don't forget that the markets have been falling steadily for a couple of weeks so we can assume one factor.  Incompetence in the White House. 

 

Did that help you understand what is going on? 

 

Did you read the post you were theoretically responding to?

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Re: How Do Interest Rates Affect the Stock Market?

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Message 3 of 17

@rk9152 wrote:

It is still confusing. When  the market is up that is bad because those nasty ol' 1%ers are getting rich. Yet when the market is down, it's still bad because retirees are losing. I would think that those retirees would be happy when it is up (regardless of the Party of the President).


I can certainly see why it would be confusing to anyone with absolutely no grasp of how capitalism or markets work.  I can see by your assumptions that you think this is some kind of popularity contest when it is really more about assumptions for the future based on the current actions. Short term (!!) interest rates were raised  1/4 of a percent so if people were moving money out of stocks (long term investments) because of the interest rate hike, they would have been weighing that as 1,600 times the rate increase for Friday alone. Seems high unless you can factor in another issue such as.........Trump's willingness to close the government. Trump's willingness to start a trade war, Trump's inability to abandon our military (and economic) allies, and Trump's inability to keep on any one policy track past the last conservative talk radio show. 

 

Don't forget that the markets have been falling steadily for a couple of weeks so we can assume one factor.  Incompetence in the White House. 

 

Did that help you understand what is going on? 

 

 

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Re: How Do Interest Rates Affect the Stock Market?

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Message 4 of 17

@Olderscout66 wrote:

@rk9152 wrote:

@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??


It would be if it were true, but its not, so its bad news.

All the folks you mention have no need to sell any investments to maintain their lavish lifestyles - they live like kings on 30% of their INCOME, the dividends are just gravey to finance additional sterile investments.

 

The only ones getting seriously shafted by Trump for the moment are retirees who are depending on their investments to pay the bills since Republicans made it so lucrative for companies to eliminate fixed pensions and put everyone at the mercy of Wall Street for their retirement. And. to a lesser extent, those trying to invest enough to eventually retire- would not be a bit surprised if there's a bunch of 40-somethings wondering why their 401k is worth LESS then the amounts they put in over the past two decades, and if they'll be able to retire when they're 75 or will work forever. Saw this happen to a lot of folks back in 1987 and again in 2008.


It is still confusing. When  the market is up that is bad because those nasty ol' 1%ers are getting rich. Yet when the market is down, it's still bad because retirees are losing. I would think that those retirees would be happy when it is up (regardless of the Party of the President).

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Re: How Do Interest Rates Affect the Stock Market?

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Message 5 of 17

Of course, you have to remember that higher interest rates only effect the market to a certain point. The Fed raised rates 1/4 of a percent (.0025%) so even at double that effect on the equity markets, they should only have dropped 1/2% AT THE MOST. Plus,the reason the FED increased the rates was the fact that the economy was so robust.  Always a sign that stock prices should be higher in the next six months. 

 

That means that investors were not looking at the FED rate hike but other factors. The government shutdown, the unfocused trade war, the inability of Trump to articulate any coherent economic policy.  They all led to investor fear and a wild selloff.  Once again, I get to say "I told you so". Trump's policies cause a huge decline in the one metric he has been using to judge his administration. 

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Re: How Do Interest Rates Affect the Stock Market?

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Message 6 of 17

@rk9152 wrote:

@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??


It would be if it were true, but its not, so its bad news.

All the folks you mention have no need to sell any investments to maintain their lavish lifestyles - they live like kings on 30% of their INCOME, the dividends are just gravey to finance additional sterile investments.

 

The only ones getting seriously shafted by Trump for the moment are retirees who are depending on their investments to pay the bills since Republicans made it so lucrative for companies to eliminate fixed pensions and put everyone at the mercy of Wall Street for their retirement. And. to a lesser extent, those trying to invest enough to eventually retire- would not be a bit surprised if there's a bunch of 40-somethings wondering why their 401k is worth LESS then the amounts they put in over the past two decades, and if they'll be able to retire when they're 75 or will work forever. Saw this happen to a lot of folks back in 1987 and again in 2008.

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Re: How Do Interest Rates Affect the Stock Market?

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Message 7 of 17

@Richva wrote:

@rk9152 wrote:

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


Your glee at the destruction of the American system of capital is an insight into why you support Trump. Eh Comrade?


Surely you saw no glee in that.

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Re: How Do Interest Rates Affect the Stock Market?

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Message 8 of 17

     As if the Interest Rate is the only thing that affects the market.    What about the fact that the Dollar has sunk in value against most currencies and the VIX is heading upwards as well.    It is unclear what is the point of cherrypicking metrics about the national economy.   Most economists suggest that the chaos in DC.   

     Reminder:   The second in command of Senate headed home on Thursday, assured that Donald had agreed to the compromise that the Senate had passed.    He was headed back to DC in 12 hours because Donald decided to blow up the deal.  

PRO-LIFE is Affordable Healthcare for ALL .
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Re: How Do Interest Rates Affect the Stock Market?

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Message 9 of 17

How Do Interest Rates Affect the Stock Market?

 

To me it's not complicated or indirect.

 

The safe low return investments like treasury bonds, pay the lowest rate, low risk, low reward.

 

The high risk high return investments like stocks pay the highest reward but entail the highest risk.

 

As interest rates go up a long term bond purchase looks better compared to stocks.

 

Now I think long term treasury bonds are 2.6  percent, and they are going up, just as boomers are looking for a safe place to put savings.

 

In addition, the projected deficit for 2019 is 1000 billion dollars, after eight years of a tight belt under Obama, Trump and Congress went on a spending spree that  included  tax cuts for the wealthy, and tax increases and austerity for everyone else.

 

We haven't had a recession since 2008, we're overdue for one, and Republican budget projections have been based on exceptionally high GDP growth.

 

Personally I see US debt as out of control, and no political will to curb it under Trump and Republicans, all they have to offer is more austerity and tax increases for the poor and the middle class, and more tax cuts for the wealthy.

 

So what will the deficit be during a recession?  Current projections are 1000 billion in 2019, under a recession 1500 billion, 2000 billion?

 

What do you think piling debt on like that is going to do to interest rates?

 

I think interest rates are going up, and the risk of the stock market is going up, while the difference between the return  on stocks and treasury bonds narrows or disappears.

 

I expect money to move to treasury bonds.

 

 

 

 

 

 

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Re: How Do Interest Rates Affect the Stock Market?

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Message 10 of 17

@rk9152 wrote:

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


Your glee at the destruction of the American system of capital is an insight into why you support Trump. Eh Comrade?

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