Since 1991, there have been three periods of rising interest rates, and the S&P 500 rose in all three instances.
“Rising rates have clearly not been bad for stocks over the past two decades,” S&P Dow Jones Indices said.
Yet looking back further, since 1953 rising Treasury yields have been bad for the stock market.
“The data for the past two decades are not consistent with the entire history of the past 60 years. The longer data set tells us that stocks do best when rates fall the most, and vice versa. But this does not seem to be reflected in recent years,” according to the report.
“To what degree should the prospect of Federal Reserve tapering unsettle equity investors? The evidence does not allow a definitive answer,” it concluded. “There are good reasons to believe that the prospective increase in interest rates will be bad for the stock market, and there are good reasons to believe the opposite. If it is true that interest rates and stock prices can both be driven by the same set of exogenous economic variables, it’s arguable that the variables that will lead the Fed to increase rates will also support higher equity prices.” [Stock, Treasury ETFs Look to ‘Taper Lite’]
