The relationship between interest rate and stock market

Financial factors are the most sensitive to the factors affecting the price of the ticket market and stock prices. Among the financial factors, the change of interest rate level has the most direct and rapid effect on stock market. In general, when interest rates fall, the prices of stocks go up; When interest rates rise, the prices of stocks fall. Therefore, the interest rate and the relationship between interest rate and stock market also become the important basis for stock investors to buy and sell stock.

Why does the change in interest rate rise and fall in the stock price show the inverse movement of the relationship? The main:

1. The rise in interest rates will not only increase the company's borrowing costs, but will also make it difficult for the company to obtain the necessary funds, so that the company will have to cut production scale, and the shrinking of production will inevitably reduce the company's future profits. As a result, prices will fall. On the contrary, the stock price will rise.

2. When interest rates rise, the discount rate at which an investor assesses the value of a stock will also rise, thereby reducing the value of the stock, which in turn will result in a corresponding decrease in the stock price, whereas when interest rates fall, the stock price will rise.

3. When interest rates rise, some of the money shifts from investing in stocks to bank savings and buying bonds, thereby reducing the demand for stocks in the market and causing stock prices to fall. Conversely, when interest rates fall, the profitability of savings is reduced, and some of the money is likely to return to the stock market, thereby increasing demand for stocks and increasing stock prices.

The above-mentioned interest rate and stock price movement in the opposite direction of the change is the general situation, we can not be absolute. In the history of stock development, there are some relatively special cases. When the shape of the situation is bullish, when the stock market soared, the adjustment of interest rates on the price of control will not be very large. Similarly, when stocks are in a slump, even if there is a downward adjustment policy, the stock price may rebound weak

The relationship between interest rate and stock market