After the 1,300-point drubbing the Dow Jones Industrial Average experienced in the last two trading sessions, investors were quick to point fingers at a number of factors contributing to the steep loss, such as rising interest rates. However, history shows that investors shouldn’t fret when rates are rising because these moves are marked by subsequent gains in the major indexes.
“Since 2010, the 10-year yield has jumped by at least 25 basis points in a 30-day period 14 times,” CNBC’s George Manessis noted. “During these moves, the markets tend to move significantly higher: with the Dow, S&P and Nasdaq all gaining much better than 3 percent – the three trading positively 86 percent of the time.”
Benchmark Treasury yields continued their upward trajectory with the 10-year yield rising to 3.163, while the 30-year rose to 3.336. Shorter duration bond yields also went higher with the three-month note ticking up to 2.271, the two-year to 2.857 and the five-year to 3.017 as of 12:45 p.m. ET.
This, however, was paired with a rise in the Dow, which pared its losses from the previous sessions by over 300 points before settling to a gain of 100 points at the time of this writing.
Related: Rising Interest Rates’ Potential Midterm Impact
Jamie Dimon: ‘Rates Going Up Are a Plus’
J.P. Morgan Chase CEO Jamie Dimon reaffirmed the strength of the economy, citing a robust labor market among a host of other factors and also noting that higher interest rates are on the horizon.
“The economy is still very strong, and that’s across wages, job creation, capital expenditure, consumer credit; it’s pretty broad-based and it’s not going to be diminished immediately,” said Dimon said in a media conference call after J.P. Morgan’s earnings report. “I was pointing out the probabilities that I thought were higher that rates would go up. I still believe that. I do think you’re going to see higher rates.”
J.P. Morgan Chase reported that its third-quarter profit rose by 24% compared to a year ago, helped by the U.S. President Donald Trump administration’s tax cuts. In addition, net income was $2.34 a share, which beat estimates of $2.26 per share.
Furthermore, Dimon viewed rising rates as a positive for the economy and dismissed Trump’s latest criticisms of the Federal Reserve regarding rate hikes as standard fare for all presidents.
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