Can Stocks and Interest Rates Both Go Up?
Ever since the Federal Reserve announced its pivot against inflation back in November, it’s been rough sledding for stocks. The combination of high inflation, the war in the Ukraine, and higher interest rates have investors asking if it’s even possible for stocks to go up in such an environment. We think the good news is that once stocks price in news, prices tend to rapidly reset, which then allows stocks to move on from the current news cycle. This means that stocks can often climb a wall of worry or move lower on a sea of optimism. Moving forward, we believe that most interest rate increases have been priced into stocks, have reset valuations, and now offer investors a moment to buy into attractive growth companies.
Key Takeaways
- We see many commodities are quietly selling off, which should ease inflationary pressures.
- We believe stocks are trying to carve out a bottom, but we need to see a break above prior breakdowns to increase our level of confidence
- We think Interest rate expectations are beginning to fall as growth and inflation slow
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