Interest Rates And Stock Trading
Interest rates and their trends are a key determiner of government economic influence and barometer of the current state of the economy and where it is in the economic cycle.
In general high interest rates are associated with economic highs and low interest rates with economic cycle lows as governments lower rates to stimulate economic activity in a downturn and raise rates to slow down activity.
Despite the fact that there is a significant time lag between any government intervention and actual impact on the economy, the current interest rate is a reasonable indicator of where the economy is heading.
So, interest rate reductions tend to boost the stock markets, whereas interest rate increases have the opposite effect. Falling interest rates are typical during a bullish transition phase in the markets, rising interest rates indicate a bearish transition.
Like I said these are only broad indications but are vital in understanding where the stock markets are headed.
Dave J.
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