Dimensional - What Happens to Stocks when Interest Rates Change

Dimensional examines U.S. equity market returns and a variety of interest rates to understand if there is a relationship between them and finds that there is no clear relation in the data.

Key Takeways

  • Interest rates are largely unpredictable and even if we had perfect insight into interest rates, it would give us very little insight into future equity returns.
  • The relationship between equity returns and interest rates is not clear and adds no useful guidance in making investment decisions.
    • Staying disciplined and avoiding speculation puts investors in the best position to capture equity returns in any interest rate environment.

      - Wei Dai, PhD, Senior Researcher and Vice President, Dimensional Fund Advisors

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