The bond relating to the direction of stock price movements and trends in interest rates has been long recognized. As a general rule Uomo Nike Air Max TN Nere Verdi Italia , stocks tend to rise in price during periods that interest rates decline and to make relatively little progress, on balance, during periods that interest rates advance.
The tie involving the direction and levels of rates of interest as well as the overall performance of the stock market, once more, are very well known hence the old saying: Never fight the Fed. Despite the fact that correlations are Nike Air Max TN Uomo Marina Italia , again, not quite perfect, generally, stocks do best when interest rates are steady to declining, and worst when interest rates are volatile and rising.
Hardly a big surprise if you take into account the positive impacts of comparatively low interest rates on the financial system as well as on the stock market. Low interest rates Uomo Nike Air Max Plus Sunset Nere Blu Italia , for instance, result in reduced home loan payments, which support the pricing of homes and real estate, which leads to increased building, which benefits all those industries associated with office and home building and contributes to homeowners’ sense of well-being nike air max 2019 italia , which leads them to spend more money on products or services, and so on.
Low interest rates also support business investment, the purchase of inventory, installment sales to the public, and so forth–all that are good for business conditions.
Low interest rates reduce the competitiveness of long-term bonds nike air vapormax plus italia , shorter term money market funds, and bank cd’s in comparison to the stock market. This boosts the concentration of investments into stocks and, thus, directly and indirectly into completely new and well-known firms.
Conferences of the Federal Reserve Board are assessed in the financial press for indications of policy changes which may impact the levels of interest rates. The Fed continues to be rather responsive to the possible effects of financial policies upon the stock market, in recent decades moving speedily to lower short-term interest rates (that are under its control) anytime the stock market runs into considerable trouble. As an example nike air vapormax italia , the Fed lowered rates quickly following the market crash of 1987 and through the market correction of 1990, decreased rates a dozen times during the 2000-2002 bear market, and maintained reduced rates during the market recovery of 2003.
Rate of change measurements determine momentum, which is the rate at which price changes are taking place. Think about a golf drive, for example. A well-hit ball leaves the tee quickly nike air max 270 italia , rising and gaining altitude quickly Momentum can be quite high.
Although it may be tough to estimate the carry of the drive in its first rise from the tee, it is often possible to ascertain, from the initial rate of rise of the ball, that it is a well-hit drive, likely to carry for some considerable distance. Ultimately nike air max plus tn ultra uomo italia , the rate of climb of the ball obviously decreases and the ball will lose momentum. At this time, an estimate of the final distance of the drive could be more easily made.
The key idea involved is that rates of rise diminish before declines actually get under way. The falling rate of change of the drive provides advance warning that the ball is soon going to fall to the ground.
Making use of both interest levels and the rate of change indicator will help you better spot major market reversals at both the top and bottom of bull and bear markets.
Jerry Wooten is an angel investor together with a writer. He publishes a range of reports about stock trading. To discover by far the most sophisticated stock investing software package on the planet which has enhanced my accuracy rate to 75% see: stock screener
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