The hottest Interest Rates Substack posts right now

And their main takeaways

What happens to stocks when the Fed pauses on rate hikes?

Jon’s Newsletter • 0 implied HN points • 19 Jun 23

When the Fed pauses rate hikes for three months or more, it usually boosts stock performance. Historically, stocks saw average gains of over 8% during these pauses.
Shorter pauses in the tightening cycle have mixed results. In some cases, stocks went up mildly, while in others, they saw small declines.
If the Fed maintains the pause until September, it suggests a positive outlook for stocks, especially if interest rates have peaked. However, if rates continue to rise, the market impact is less clear.

Interest Rates, Earning Growth and Equity Value: Investment Implications

Musings on Markets • 0 implied HN points • 25 Mar 21

💰 Finance Investment Interest Rates Stocks Economic Growth Market Trends

Interest rates have risen significantly, which affects how investors view stocks. Higher rates can lead to lower stock values, but it depends on whether the rise is due to economic growth or inflation.
Different types of companies react differently to interest rate changes. Young growth companies, which rely more on future earnings, can be hurt more than mature companies during times of rising rates.
The performance of the stock market has been uneven, with some sectors thriving while others struggle. The ongoing shifts highlight the complex relationship between interest rates, economic growth, and stock performance.

Interest Rates and Stock Prices: It's Complicated!

Musings on Markets • 0 implied HN points • 02 Mar 18

💰 Finance Interest Rates Stock Markets Economic Policies Market Trends Investment Strategies

The Federal Reserve doesn't have total control over interest rates. It can influence short-term rates, but other economic factors play a bigger role in how markets react.
The link between interest rates and stock prices is not simple. While higher rates typically hurt stock prices, other factors like economic growth and inflation can change that effect.
When looking at stock values, it's important to have a clear story. Different scenarios about the economy and interest rates can lead to different conclusions about stock prices.

Myth 4.5: DCFs break down with near-zero risk free rates!

Musings on Markets • 0 implied HN points • 04 Nov 16

💰 Finance Valuation Interest Rates Investment strategy Risk management Market Analysis

Lower risk-free rates can increase the value of future cash flows in discounted cash flow (DCF) models. This means that when interest rates go down, it can make companies look more valuable.
It's important to adjust growth rates and risk premiums alongside changes in risk-free rates. If you change one factor without looking at the others, your valuation might be way off.
Using historical data for risk premiums while ignoring current rates can lead to misvaluations. As rates change, you need to rethink the risks associated with investments.

Negative Interest Rates: Impossible, Unnatural or Just Unusual?

Musings on Markets • 0 implied HN points • 11 Mar 16

💰 Finance Interest Rates Investing Economics Monetary Policy Financial Markets

Negative interest rates are a real phenomenon, where borrowing costs can drop below zero. This happens when people expect prices to fall and aren't willing to wait to consume.
Central banks can't just force interest rates to stay negative; they influence rates through market signals and buying bonds. If people don't trust these banks, rates may not behave as expected.
Negative rates can hurt the real economy since people might avoid investing. This uncertainty can lead to higher risk in financial markets as investors chase after returns.

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January 2016 Data Update 2: Interest Rates, Exchange Rates and Currencies

Musings on Markets • 0 implied HN points • 08 Jan 16

💰 Finance Interest Rates Corporate Finance Investment decisions Macroeconomics

Interest rates and exchange rates are key players in finance because they affect investment returns and company earnings. Trying to predict changes in these rates can lead to mistakes.
There is no one-size-fits-all risk-free rate; it varies by currency and country. To find a risk-free rate, you need to account for local factors like government bond rates and default risks.
When dealing with different currencies, it's important to stay consistent in your valuations. This helps make sure that changes in inflation and risk are accounted for fairly across different currencies.

The Fed, Interest Rates and Stock Prices: Fighting the Fear Factor

Musings on Markets • 0 implied HN points • 04 Sep 15

💰 Finance Interest Rates Stock Markets Central Banks Economic Policy Market Trends

The Federal Reserve doesn't directly set all interest rates. They mainly control the Fed Funds rate, which doesn’t affect most people directly.
Low interest rates are not solely because of the Fed. They reflect low inflation and slow economic growth, not just central bank actions.
High stock prices don't only result from low interest rates. They also depend on company earnings and cash flows, which are currently under pressure.

Dealing with Low Interest rates: Investing and Corporate Finance Lessons

Musings on Markets • 0 implied HN points • 03 Apr 15

💰 Finance Investing Economics Corporate Finance Interest Rates Central Banks

Low interest rates are a global issue, and they can create confusion for investors and businesses. It's important to understand that these rates are affected by factors like inflation and economic growth, not just central bank policies.
Central banks do influence interest rates, but they don't completely control them. Instead, real fundamentals of the economy play a much bigger role, so investors should focus on those instead of solely following central bank actions.
When dealing with low interest rates, investors should adapt their strategies. Instead of longing for 'normal' interest rates from the past, they need to base their decisions on the current market conditions and remain flexible with their assumptions.

The Fed and Interest Rates: Lessons from Oz

Musings on Markets • 0 implied HN points • 21 Jun 13

💰 Finance Interest Rates Monetary Policy Economic Growth Market Analysis Investing Strategies

The Fed has a big influence on the stock market, but it's not as powerful as many investors think. Market reactions often come from what people believe the Fed will do with interest rates.
Interest rates are determined not just by the Fed, but also by supply and demand in the economy. As the economy grows, interest rates tend to rise because of increased demand for capital.
Investors need to be careful about how they assume the economy and interest rates will behave together. Scenarios where growth happens while keeping interest rates low may not be realistic.

Inspiration or Insanity? Fed action and Market Reaction

Musings on Markets • 0 implied HN points • 17 Sep 12

💰 Finance Monetary Policy Market Analysis Economic Growth Interest Rates Inflation

The Federal Reserve only controls the Fed Funds rate, not other interest rates like mortgages or corporate bonds. This means that its power over the entire market is limited.
The Fed can influence short-term interest rates more easily than long-term rates. Despite their actions, they can't fully control the bond market, which is very large.
If the economy starts growing, interest rates are likely to rise, which contradicts the Fed's goal of keeping them low. This creates a tricky situation where their actions may not lead to the intended economic growth.

Operation Twist II: The Fed as Chubby Checker

Musings on Markets • 0 implied HN points • 16 Sep 11

💰 Finance Monetary Policy Economic Growth Interest Rates Stock Market Federal Reserve

Operation Twist II involves the Fed changing what types of bonds it buys without adding more money to the economy. This means they're focusing on long-term bonds to lower their rates.
There are three main ideas about how this could help the economy: lowering long-term rates could encourage borrowing, make people feel more confident in spending, and raise stock prices by shifting the way rates affect valuations.
However, there are doubts about whether these ideas will actually work, as the current rates are already low and it’s unclear if this action will cause meaningful changes in growth or prices.

QE2 or the Titanic?

Musings on Markets • 0 implied HN points • 04 Nov 10

💰 Finance Monetary Policy Inflation Interest Rates Debt Management Monetary Policy Interest Rates Inflation

Injecting money into the economy aims to lower interest rates and encourage borrowing, but rates are already very low. It's unclear if lowering them further will actually get people to borrow more.
Many households are already in debt, and encouraging them to borrow more could lead to future financial problems. It's like creating a bubble that could burst.
There's a worry that printing more money could lead to inflation and make the dollar weaker, which would increase prices for imported goods. This could hurt consumers in the long run.

The Fed Effect: Central Banks and Equity Value

Musings on Markets • 0 implied HN points • 21 Feb 10

💰 Finance Monetary Policy Interest Rates Economic Growth Equity markets Inflation Monetary Policy Interest Rates Inflation Economic Growth

Central banks like the Federal Reserve influence stock prices in complex ways. A small rise in interest rates doesn't always mean bad news for stocks as their effects can vary.
Short-term interest rates can drop when central banks raise rates, which might be seen as a move to control inflation. This action can sometimes lead to lower long-term rates.
The credibility of a central bank matters a lot. If it’s seen as strong and effective, a rate increase can be viewed positively, suggesting the economy is strong enough to handle it.

What is going on with the inflation indexed treasuries?

Musings on Markets • 0 implied HN points • 18 Oct 08

💰 Finance Investing Market Analysis Bonds Interest Rates

Inflation-indexed treasuries offer protection against inflation while traditional bonds have set coupons. This creates different return expectations based on inflation rates.
Recently, there has been an unusual rise in real interest rates for inflation-indexed bonds, while nominal rates have stayed the same. This trend is puzzling and contrary to expectations based on economic conditions.
One possible reason for the unusual behavior is that investors are selling inflation-indexed bonds for liquidity, which might bring their rates back to normal levels soon. If that happens, these bonds could become a good investment opportunity.

Economic Calendar for the Week of January 26, 2025

Alex's Personal Blog • 0 implied HN points • 27 Jan 25

💰 Finance Economic Events Market Trends Earnings Reports Consumer confidence Interest Rates

Multiple companies are sharing their earnings, including big names like Microsoft and Tesla. This shows a busy week for financial updates.
Economic events are scheduled, like new home sales and consumer confidence, which can affect market trends. Keeping an eye on these numbers is important.
Global economic updates will also take place, like trade balances in Mexico and jobseekers data in France. This information helps understand the international economy.