Tags: Hulbert | rising | rates | stocks

MarketWatch’s Hulbert: Rising Interest Rates Won’t Necessarily Torpedo Stock Market

Wednesday, 12 Dec 2012 08:50 AM

By Dan Weil

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At some point interest rates are going to rise from their near-record lows, and some expect the rise to be huge.

But that doesn’t mean stocks will suffer, says Marketwatch.com columnist Mark Hulbert.

Tim Hayes, chief global investment strategist at Ned Davis Research, researched the rolling one-year correlation between interest rates and the stock market over the last five decades, Hulbert says.

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

“[H]e did not find that the correlation was always or even predominantly negative, as many today are so worried,” Hulbert writes.

Hayes discovered that “significantly negative correlations” between the Standard & Poor’s 500 Index and the 10-year Treasury note occurred only when it yielded more than 5 percent. That’s a world away from its 1.65 percent level Tuesday.

Hayes concludes interest rates have “substantial room” to ascend before “deterring stock market performance.”

This doesn’t guarantee that stocks won’t plummet when rates rise. But it does suggest the folly of “making all-or-nothing bets” on that idea, Hulbert says.

Bank of America analysts think rising rates will actually help stocks. They see a “Great Rotation” into stocks from bonds next year, CNBC reports.

"What's the best thing about equities? Bonds," says Michael Hartnett, BofA’s chief investment strategist. "Historically, when we see a major inflection point in the bond market, you see the equity market break out of a long-term trading range."

Editor's Note: The Truth About the Economy — Government Documents Lead to Eerie Conclusion

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