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Markets determine what is to fast ….it isn’t like it is a magic number.
It is no different than fed wording ….if markets like the fed wording they respond favorably, if they don’t they fall …they weigh what is known up to the minute , look at the situation and decide what is good wording or bad wording .
The same thing applies to rate increases.. the markets look at the increase , inflation and earnings as well as everything else and then decide if they are okay with it or not.
You can see all different rate increases by the fed in a year above and look how the bond market responded by liking the increases ..well except once when it didn’t like the increase in 1994 when a mere 1.19% increase sent bonds to losses .
In the mean time a 1.65% rise in rates sent bonds soaring to 15% gains for the year .
, so there is no rule as to what is the correct glide path for rates
Last edited by mathjak107; 06-20-2021 at 03:50 PM..
rate increase does affect stock,esp growth stocks.as they are all about future earnings/
you know we are not going to stay at zero,so any rate increase could imply more to come.
rate increase does affect stock,esp growth stocks.as they are all about future earnings/
you know we are not going to stay at zero,so any rate increase could imply more to come.
Yes, but just go back and look at historically what happened to stocks when the fed raised rates .
What the market interpreted as Slow increases had markets rise …when they felt the fed was raising to quickly they fell
You can see how just because the fed raised rates it did not mean stocks fell. It took pretty high rates to get a see saw effect as a given . Otherwise rate increases vs stock action is varied.
Last edited by mathjak107; 06-20-2021 at 04:08 PM..
The Wall Street analysts all use financial modelling to derive at the future price of a stock,like CMG would be $1800,TSLA would be $1600 and Bitcoin $600,000 .what rate are they using?very low I bet,so when rate rises,they all have to revise their model and use a higher rate and the result would be different
The Wall Street analysts all use financial modelling to derive at the future price of a stock,like CMG would be $1800,TSLA would be $1600 and Bitcoin $600,000 .what rate are they using?very low I bet,so when rate rises,they all have to revise their model and use a higher rate and the result would be different
…if revenue and earnings are rising in a hotter economy no problem. Markets were booming in the late 1980s at 7- 8% interest rates.
Real estate here was soaring and I was happy to get an 8-1/4% mortgage.
You are trying to make some see saw effect and you really can’t because there are so many variables.
It is just like the reverse is true ..,real estate was in the toilet at way lower rates after 2008 …your see saw says prices should be soaring with rates plunging and we all know that wasn’t the case for many years.
You can clearly see in the above graph rising rates vs stock performance has no real link until rates get way way high
I’m sure there’s a treasure trove of studies out there using multivariate regression to try and provide evidence that suggests interest rates drive the market and how much change causes how much movement. They’ll look at a grouping of variables deemed relevant and then they each have a null hypothesis or an alternative hypothesis analyzed. Every variable will have an “R” value to provide evidence that suggests it’s causing x amount of the movement among many many variables. Each one would have confidence intervals within 3 standard deviations that we have the percentages mostly narrowed down to a certain range of out comes 95 or 99% of the time. To your point, rates are just one variable among a sea of them and probably has far less effect than those shooting from the hip would expect upon an actual statistical and calculus analysis. Like almost everything, it’s been looked at by people far smarter than all of us.
Or as the Reddit crowd would say, lulz diamond hands to the moon!! Me make money. You traditional finance. Me know it all. Go 100% crypto cuz reasons.
Last edited by Thatsright19; 06-21-2021 at 05:56 AM..
I can tell you how well the market did today tomorrow.
Well, that’s still better than some. Some can’t even acknowledge or understand what’s already happened.
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