Will Stocks Go Down if Interest Rates Go Up?

By Chief Executive Officer, Vern Sumnicht on September 27, 2016

Currently, the ten-year Treasury bond interest rates are about 1.62% (September 2016).  Many investors are concerned that when the Federal Reserve stops printing money, interest rates will go higher and their stock portfolios will go lower.

Fortunately, there is some historical precedent that might provide some insight into how the stock market might do in a rising interest rate environment.

Back in the 1950s, much like today, the Federal Reserve was printing money and using it to buy Treasury bonds in an effort to keep interest rates artificially low.

As the Fed began to “taper off” on printing new money, interest rates started to rise. Interest rates ran up from 2.5% in 1955 to almost 6% in 1968 (see the graph below).

will-stocks-go-down-if-interest-rates-go-up-1-png

What happened to the stock market during this period of rising interest rates? The stock market soared (see graph below) this was one of the best historical periods the stock market ever experienced.

will-stocks-go-down-if-interest-rates-go-up-2

Summary

History teaches that the last time interest rates on the ten-year Treasury bonds went up from 2.5% to 6%, the stock market went up 300%.

******

Vern Sumnicht has over 25 years of experience as a successful financial planner and has been recognized for four consecutive years by “Worth Magazine” as one of the Nation’s Top Wealth Advisors.

The opinions discussed herein are those of Sumnicht & Associates, LLC.  This is neither an offer nor a solicitation to buy and/or sell securities. The information provided in this material should not be considered as a recommendation to purchase or sell any particular security. You should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from a qualified investment professional. It should not be assumed that any of the securities transactions or holdings discussed will prove to be profitable. There are risks involved with investing including the possible loss of principal. An investment in any securities is not guaranteed and, at any given time, may be worth more or less than the amount invested.  Investors should carefully consider the investment objectives, risks, charges and expenses before making any investment.  Information pertaining to Sumnicht & Associates, LLC’s operations, services and fees is set forth in its current disclosure brochure (Form ADV, Part 2 Brochure), a copy of which is available upon request.

 

©2016 Sumnicht & Associates, LLC    All Rights Reserved

Comments

Sign in to read more
Register to read more
By registering, you verify that you are a investment professional. If you have questions as to whether you should have access to the content on this site, please contact us.