Conventional wisdom holds that when interest rates rise, it’s bad for businesses and thus bad for stocks. Inversely, when interest rates are falling, businesses benefit, so stocks should perform better.
Both conclusions make perfect sense … but are they supported by evidence?
In this brief, informative video, a senior researcher at Dimensional Fund Advisors plots historical equity returns against interest rates from August 1954 to December 2016 to see if there is any discernible pattern. The results may surprise you.
What isn’t surprising, however, is the bottom line: instead of trying to predict what can’t be controlled, investors should stick to a long-term strategy of diversification coupled with proper asset allocation. Future market conditions will always be uncertain; strategy and discipline will always be your most reliable guides.
Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.
