The Relationship between Stocks and Interest Rates

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Great visual / tabular explanation of why a growth stock is hit harder by higher rates than a value stock. Of course the relationship is oversimplified here but you stated as such. I personally believe a 20-30% correction is way too much, we will see 10-15 would be my guess… But this is not financial advice and I am stupid

cristiano-potato

Ark is gonna get crushed

Michael12390

This makes sense, but what still isn’t clear is: if people are pulling money out of equities, where are they putting the money? Presumably they pull money out because they expect inflation + rising interest rates for other assets. But then wouldn’t they put the money into bonds, because yields are so high? And if they put the money into bonds, the prices rise, and wouldn’t the yields eventually drop?

SaitosElephant

Thank you for the writeup. Does this mean you’re predicting a 20-30% correction on speculative tech stocks, or the market in general? I’m having trouble seeing us below S&P3000, which is what you’re implying.

elongated_smiley

The thing that didn’t make sense to me was that 1, Powell said they will keep inflation under 2% 2, Powell said interest rates won’t go up any time soon. He literally said full employment took years after 2008 and this was a similar situation. They want full employment. The only concern I had from his comments was that he values some degree of higher inflation if it gets higher employment. So, I don’t know what the market was expecting. As jobs return the entire economy will grow and most businesses will benefit. The fed will raise rates to combat any inflation. This is another decade of low rates. This should value growth stocks.

bosshax