Rising rates also typically coincide with an expanding economy. A central bank would monitor rates as a way to keep the economy from overheating. [Will Rising Rates Kill the Stock ETF Rally? Not Necessarily]
“An analysis of the past 140 years shows periods with rising rates have typically been associated with positive future equity returns, driven by improved economic growth,” Brian Krawez, president and lead portfolio manager at Scharf Investments, said in the note.
Moreover, Norther Trust Corp. has found a positive correlation between interest rate moves and stock returns when the benchmark 10-year Treasury yield was below 5%. Morgan Stanley has calculated that the correlation between the S&P 500 in periods where yield was less than 5% going back to 1980 was at a moderately strong 0.46.
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Max Chen contributed to this article.
