INTEREST RATES vs SHARE PRICES: A TALE OF TWO ECONOMIES.

2 Responses to INTEREST RATES vs SHARE PRICES: A TALE OF TWO ECONOMIES.

  1. Thomas Weiß says:

    Isn’t that the normal relationship, low rates of interest and high share prices? The lower the rate of interest the higher is the valuation of the share prices, of those shares at least with somewhat stable dividends. These are not two econmies, but just one.

    • In general your statement is true. Interest rates and share prices tend to move inversely. But here we are talking about something unique which has only occurred since 2008 and that is financially engineered interest rates by the FED which has caused them to lost most of their signaling function. However, despite this, the fall in the 10-year rate, and by the way this week it has retreated below 1.3% despite stronger indications by the FED of tapering, suggests it is predicting a downturn whereas share prices are predicting all is well in the economy, which of course it is not.

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