Stock Market To Expect Trouble From Diminishing Interest Rates

May 29, 2019 | Wednesday



The interest rates are falling leading mortgages, and other loans lower. However, it is likely to drive trouble and impact the whole stock market.

This month, the Treasury yields made a huge downward movement as trade disputes concern increases, making the economic data frustrated. The yields have gone to the opposite prices and moved lower as interest rates insinuate investors are looking for safety in bonds. The S&P 500 already lost 4 percent since the start of the month of May.

On Tuesday, Credit Suisse analysts viewed the period between December 24, those days wherein stocks dropped and rumped out, up to last Friday. It showed that the declining days of interest rates are meant to lower the stock prices.

Moreover, the S&P 500 was down close to 8 percent, considering the days wherein the yields are falling. On the contrary, counting the stock market movements on days when yields are higher, the S&P 500 was seen rising up to 30 percent, rather than a 20 percent it inclined to since December 24 last year. Similarly, the 10-year yield losses around 42 basis points within the market.

The Treasury yields are moving lower while concerns on the U.S. economy and the current trade disputes exist. Meanwhile, the U.S. benchmark also follows Europe's German 10-year bond yield, it moved lower, surrounded by economic, and political concerns. In addition, the 10-year Treasury yields 2.26 percent, its lowest since September of the year 2017. Since the start of the month of May, the 10-year yield was at 2.55 percent.

According to Patrick Palfrey, Credit Suisse equity strategist, the interest rates are acting as the "barometer" of future expectations. Palfrey said that it was a good measurement of what the investors are focusing on. Whether the interest rates are decreasing, it's expected to have a less bright outlook.


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