Interest rates “surged” yesterday”. The 10 year Treasury yield went up more than 3.4%
Mainstream financial media attributes today’s stock market decline to rising interest rates. Funny enough, the same thing was said earlier this year from April – May 2018, yet the stock market went up.
We’ve demonstrated before that rising interest rates aren’t consistently bearish for stocks. We’ve demonstrated that the stock market goes up more often than it goes down when interest rates rise.
Here’s another way to look at this. $TNX (10 year yield) went up more than 3.4% this Wednesday.
These interest rate spikes are very common. In fact, they’ve happened 211 times from 1970 – present.
When $TNX spiked more than 3.4% in 1 day:
- 1 year later, the S&P 500 was higher 85% of the time.
- 2 years later, the S&P 500 was higher 92% of the time.
As you can see, rising interest rates aren’t consistently bearish for the stock market. There’s no certainty in the markets. There’s only probability. And more often than not, interest rates and the stock market go up together. It’s just that when interest rates go up, the stock market’s rally becomes choppier.
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