How does the rise in Interest Rates affect the prices of Shares?
Do they increase of decrease? Is now a good time in investing in shares or when the interest rates go up more? Or is it very individual to a particular company?
2007-01-15 22:04:39 · 3 answers · asked by weird_girl 3 in Business & Finance ➔ Investing
when interest rates increase, share prices should decrease because people will be a bit more interested in saving money instead of investing it (i did a really brief summary of the mechanism , the detailed mechanism is quite complicated)
2007-01-15 22:09:43 · answer #1 · answered by tarik b 2 · 2⤊ 0⤋
I answered this question yesterday to someone else I think. When interest rates move up investors move form Bonds to Stocks pushing it's price up. When interest rate goes down the opposite happens. So considering this this is a good time to invest. Fear of inflation is also the reason why interest rate goes up. In such situation the stocks perform well due to demand pull inflation present. If Bonds are held for long in such situation it's value will come down, so is rational to switch to stocks from bonds.
2007-01-16 04:12:01 · answer #2 · answered by Mathew C 5 · 0⤊ 0⤋
shares fall because cost of debts go up, sales fall and cash becomes more competitive.
There are some shares which should rise e.g. debt free direct benifits from more loan defaults.
2007-01-16 04:44:09 · answer #3 · answered by Anonymous · 0⤊ 0⤋