Skip to content




Rates and Equities Tell Different Stories

Interest rates are a strong indication of future growth and inflation, which would lead us to believe that if our expectations of future growth and inflation increase then interest rates should move higher.  Under this same scenario of higher growth expectations, we would expect equity markets to rise as they have during the last 12 months.

If we cherry pick a date in the past, July 9, 2009:

  • S&P 500 was trading at 882.68
  • 10 Year Treasury Yield at 3.405%

As of March 18, 2010:

  • S&P 500 has rallied 32.08%
  • 10 Year Treasury yield has increased by 27.3bps to 3.678%

It seems that interest rates and equities are following different paths.

Since May 2009, Equities have Skyrocketed while interest rates have Stagnated

It seems that deflationary pressure is still heavily weighing on interest rates while equity markets might be getting ahead of themselves.  I would feel much better investing in equities if I felt there was upward pressure on interest rates.  Which story are we to believe?

Posted in Economics, Markets.

Tagged with , , , , , .



Copyright © 2009-2013 SurlyTrader DISCLAIMER The commentary on this blog is not meant to be taken as an investment advice. The author is not a registered investment adviser. There is no substitute for your own due diligence. Please be aware that investing is inherently a risky business and if you chose to follow any of the advice on this site, then you are accepting the risks associated with that investment. The Author may have also taken positions in the stocks or investments that are being discussed and the author may change his position at any time without warning.

Yellow Pages for USA and Canada SurlyTrader - Blogged

ypblogs.com