In the world of finance and investing, interest rates play a crucial role in shaping the performance of stock markets. The relationship between interest rates and stock prices is complex and multifaceted. Investors closely monitor and analyze interest rate changes as they can have a significant impact on various aspects of the stock market.

1. Interest Rates and Stock Market Valuations

One of the primary ways in which changes in interest rates affect stock market performance is through their impact on stock valuations. When interest rates are low, investors tend to favor equities over other asset classes such as bonds or savings accounts, as the potential returns from stocks can be higher in a low-interest rate environment.

Conversely, when interest rates rise, the attractiveness of stocks may diminish as investors may seek higher returns offered by fixed-income securities. This can lead to a decrease in stock prices and overall market … More >>>