What Happens To Stocks When Bonds Go Up?
First a reminder:
Today, Friday 13th of May, is the last day we offer a 50% pre-sale discount for our quantified long-term investment course. Read more or sign up here:
Check out our investment course
What happens to stocks when bonds go up?
The relationship between the interest rate and the valuation of stocks is pretty basic:
When interest rates go down (bonds go up), it gets more attractive to own risky assets like stocks. When interest rates go up (bonds go down), it’s less attractive to own risky assets.
We did a simple backtest to “prove” the relationship between stocks and rates:
What happens to stocks when bonds go up?
The short answer is: When bonds go up stocks perform well.
Why is it a positive relationship?
Because rising bond prices mean that the coupon (the yield) goes down. When bond prices fall, it means the yield is rising.
Likewise, our backtests show that the returns in the stock market are much lower when bonds fall or are weak:
What happens to stocks when bonds go down?
This is our free newsletter. For a list of the Bonus Articles we have for our Supporting Members, please press here.
Alternatively, you can test our subscription: