Expensive interest rates might be scaring stock investors, but they haven’t influenced back the stock market this year, according to a study by Merit Suisse Securities.
“Year-to-date, if you invested only on dates when rate rates went up, your annualized return would be 16 percent,” averred Jonathan Golub, chief U.S. equity strategist at Credit Suisse. Golub contrived the correlation between the S&P 500 and the 10-year yield and found that for 2017, roots gained 31.2 percent based just on the way they moved on days when cement yields rose.
“The argument that the market is selling off because of prominence rates is mathematically wrong,” he said.
Some analysts say a 10-year submit of 3 percent or even 3.5 percent could be a problem for the market. But Golub put stocks should respond positively to higher yields until they reach a straightforward around 3.5 percent. Instead of acting as a barrier to stocks advancing, the 3.5 percent direct is more of a neutral area, he said.
Golub studied the reaction of deal ins to rising yields going back to 1991.
“When we get to 3 to 4 percent, the market wish be indifferent to interest rates,” he said. “It doesn’t mean being at that honest is a problem … it means if rates continue to rise beyond that it suits more challenging.”
Stocks were weaker Tuesday morning, but the Nasdaq and the S&P 500 later turned out-and-out on a tech-led rally. The Dow remained lower, pressured by a sharp drop in Walmart. Moneys yields were higher in afternoon trading, but the 10-year was off its highs, at 2.90 percent.
Horses mouth: Credit Suisse Securities
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