Larry Swedroe: Rising Rates Effects Unclear

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Random Walker
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Larry Swedroe: Rising Rates Effects Unclear

Post by Random Walker » Wed Jun 13, 2018 1:45 pm

http://www.etf.com/sections/index-inves ... nopaging=1

Given that the Fed will decide on rates today, this is a well timed article by Larry. He discusses knowledge versus information and the forward looking nature of markets. He reviews a paper by one of his coauthors, Andrew Berkin, that looks at how stocks behave in the year of and the year after rate changes.

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Park
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Re: Larry Swedroe: Rising Rates Effects Unclear

Post by Park » Thu Jun 14, 2018 8:52 am

My take away message from this is that there isn't a strong relationship between interest rate changes and stock returns. The exception may be high dividend stocks. Another exception may be utility stocks, which tend to be high dividend stocks.

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nedsaid
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Re: Larry Swedroe: Rising Rates Effects Unclear

Post by nedsaid » Thu Jun 14, 2018 9:10 am

Those of you interested in such things as higher dividend stocks, low volatility stocks, REITs, and utilities are seeing improved valuations with rises in interest rates. Hardly surprising in the light of rising interest rates. Not doing a timing service here but those interested in such strategies should keep an eye out for opportunities. When dividends become unpopular, that is the time to pounce. It takes a while for market psychology to change. Rates are somewhat higher but are still fairly low compared to historical averages. Last I looked, the 30 year treasury was just over three percent.

Investors should be more concerned about inflation than interest rates. We are seeing signs of inflation creeping up too. We have to see whether this is a trend or just noise.
A fool and his money are good for business.

zwzhang
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Re: Larry Swedroe: Rising Rates Effects Unclear

Post by zwzhang » Thu Jun 14, 2018 9:13 am

Park wrote:
Thu Jun 14, 2018 8:52 am
My take away message from this is that there isn't a strong relationship between interest rate changes and stock returns. The exception may be high dividend stocks. Another exception may be utility stocks, which tend to be high dividend stocks.
Another one could be impacted is REIT. But if no surprise, the rate change like yesterday should already be priced in.

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