Rising Interest Rates Aren't Always Negative for Stocks
It seems intuitive and the markets always seem to react as if rising rates are negative for equities and declining rates are positive for equities. As usual with the stock market, simple thinking can burn you very fast. The market is much more complex then just "Don't Fight the Fed". Go back to 2008 and question that thesis. Rates were declining and stocks were getting crushed. Why? Well its because even though the interest rate direction has an impact on the economy it takes a long time of up to 12 months for the impact to be felt. When the Fed is lowering rates from an already low level it signals distress which leads to panic in the markets. Did the Fed lower the fed funds rate from 2% to 1% because it wanted to juice the recovery or because they feared the Great Depression II? The announcement by the Fed last Thursday night after markets closed that they were raising the discount rate to 0.75% from 0.50% nearly sent panic around the world. That is until the US market...