Will Higher Rates Doom Stocks? Not Necessarily

2025-01-17 04:30:00 ET

Summary

• Historically, higher rates have exerted downward pressure on stock multiples, i.e. valuations.
• The relationship has only been significant with extreme moves of 3% or higher.
• A modest rise of rates on the back of stronger nominal growth would support earnings.
• High rates suggest that equity leadership may continue to reside in a handful of mega-cap companies that are relatively rate insensitive.

While stocks can move higher, the bond market will continue to matter. Higher rates suggest that equity leadership may continue to reside in companies that are relatively rate insensitive....

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