Monday, June 11, 2007

Interest rates are what brought down the market, Right?

The popular belief right now is that interest rates rising are what is putting pressure on the markets. Lets take a little closer look at that concept. Notice from the chart that interest rates have been rising since this rally started in Mar. Did we all of a sudden reach a level that was just too much for the market to handle? I guess it's possible. However rates have been rising since June of 03 and the market is up almost 100% since that time so I don't know if stock market return is extremely correlated to what happens with interest rates. Seems more likely to me that the market was just extremely overbought and was looking for an excuse to pullback a bit. Interest rates just happened to be the whipping boy at the time.