If Interest Rates Were To Rise, What Happens To Stock Prices?

Key takeaways

• Typically stocks and interest rates have an inverse relationship, as borrowing money becomes more expensive for businesses and hits their bottom lines
• However, 2023 has seen record gains for the stock market, fueled by the AI revolution and shrugging off recession fears
• The bonds market is still in an inverted curve, pushing up yields to record 2023 levels

With interest rates at their highest levels in decades, the stock market doing so well this year has been a head-scratcher. By any standard, the returns have been excellent. At the same time, bond yields, traditionally where investors flee if there’s economic turmoil, have also been at their highest in decades.

There are a few reasons the stock market is continuing to perform well, and with the economic situation in the U.S. looking increasingly promising, the markets could be in for another solid performance for the rest of the year.