> Higher rates -> reduced accessibility of personal credit -> lower spending -> lower corporate revenue -> higher cost of borrowing -> higher cost of debt service -> lower profits -> stock price
I think it's simpler than that. An absurd example: if T-bills suddenly start yielding 12%, capital will flee from stocks to T-bills.
This. As bond rates rise capital moves out of stocks over to bonds. Bonds are higher in the capital structure as well. When bond rates go absurdly low capital moves into stocks (as we have seen).
Re:The QT Timebomb
by DSingularity on Wednesday January 19, 2022 @11:41PM
(#30004737)
Will they ever yield that?!
Doesn't matter. People don't invest exclusively in one of stocks or bonds, but diversify. A higher interest rate might make bonds slightly more attractive on a continuum.
Higher rates -> reduced accessibility of personal credit -> lower spending -> lower corporate revenue -> higher cost of borrowing -> higher cost of debt service -> lower profits -> stock price
Rates act as a global parameter that impacts performance of companies differently, with the consensus understanding that it impacts debt-fuelled (or what we now usually call growth) companies the most.