Who Says Rising Rates Are Bad for Stocks?

The stock market holds this truth to be self-evident: that higher interest rates are bad for equities. If the government is offering you a sweet, “risk-free” yield for your hard-earned cash, you’ll naturally be more inclined to take it than try your chances at stocks, where nothing is guaranteed. The opposite, low interest rates, means there’s a small opportunity cost to tying up your money in equities. Indeed, the Federal Reserve’s three-plus-year emergency interest rate policy, combined with rounds of quantitative easing, has brought Treasury yields across the curve down to negative levels, in real terms—and by design. Save and you lose. Banks these days feel they are doing you a favor by paying you pennies for your cash. Ben Bernanke, for all his common-manliness, wants it that way. Unfair, you say? Then buy a house, car, or factory. And 100 shares of General Motors while you’re at it.

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