May 15, 2018
Interest Rates, Oil, and The Stock Market
There has been a lot of hand wringing about how increasing interest rates will kill the economy and the markets. The prevaling belief is that higher rates are bad. Here is an alternative view.
Here is a chart that would make one think otherwise. This is a chart of the 10-year ($TNX) from 2000 to now. The red lines were when the stock market was in trouble, the green lines was when it was doing mighty fine. Quite a coincidence that the stock market did well at the same time that interest rates were working upward, and vise versa. Of course, one correlation does not tell the whole story, but with this one might want to wish for rates to go up for longer. (Now, we know that this didn’t work in the 1970’s – rates up/economy and market bad; but hey, that was then and this is now).
Here’s another prevailing belief: “higher oil prices will kill the stock market”.
If you are trading or investing in oil, then it is prudent to track the price of oil. If you are trading or investing in the stock market, following the price of oil will do nothing but confuse you. There is no consistent or meaningful correlation between the direction of oil prices and the direction of the stock market.
Two charts as examples:
God bless you,
Ed & Branson