Question for DU market watchers ?

[DemocratSinceBirth]

Can the equities markets rise in an environment of higher interest rates ?

[SWBTATTReg]

1. I know that the bonds move in inverse to rising interest rates, as to ...

equity prices, it depends on the company and their balance sheet I would think, e.g., what kind of loan facilities that they have, what are the interest rates tied to, e.g., the London interexchange rate, or a % over prime here in the states, etc., etc., etc.

Not much of an answer...hope it helps...

[unblock]

3. many bigger companies are flush with cash and aren't bothered by rising interest rates.

smaller and medium-sized businesses typically have more of a concern.

if it becomes a problem, bigger companies can buy them up. that sort of activity can keep a bull market going a while longer.

i see the fed as rather dovish these days, so i don't expect them to hike rates enough to push us into recession.


yet.

[unblock]

2. historically, the market turns south about 6 months after the first rate hike.

we're long past that 6 months.

however, we're still at historically low interest rates and the economy is not particularly weak.
the fed is taking a very slow approach to raising interest rates. this is historically unusual as typically the fed has waited for signs of inflation before the first rate hike, meaning they had to keep raising rates in a hurry.

the slow approach is much more stable and it's unclear when the market is likely to have a more lasting downturn. if the fed doesn't overdo it, the recovery and market rise could continue for another year or two. it's hard to imagine a bull market lasting beyond that, it's already rather long in the tooth.

that said, we're long overdue for a correction. imho this is not the beginning of a bear market, at least not yet.

[SWBTATTReg]

4. Good points on both your posts! NT

[DemocratSinceBirth]

7. Maybe it was imprudent to pass a massive tax cut in a full employment economy.

[unblock]

8. "imprudent" is being polite. it was idiotic.

well, from an economist's perspective. actually, "idiotic" implies they meant well but got it wrong, when they really just intended to raid the treasury and didn't give a crap about the consequences for anyone who wasn't on the taking end of the deal.

[wishstar]

5. Rising interest rates tend to cause market to become bearish instead of bullish

as higher interest rates slow the economy because both companies and consumers have higher borrowing costs. When interest rates become more attractive to investors and market is more volatile or sluggish, investors will seek safer investments rather than having as much money in stock market.

[Orrex]

6. The important thing to remember is that billionaires will always be protected