How Do Interest Rates Affect the Stock Market?
Events since 2020 have highlighted the significant impact of interest rate changes on market behavior. These two forces generally move in opposite directions with rising rates typically causing downward pressure on stock prices. Falling rates tend to boost the market. The relationship isn’t that simple, however.
The Federal Reserve slashed interest rates to near zero in an emergency move to support the economy during the COVID-19 pandemic in early 2020. The Fed aggressively raised rates in 2022 as the economy recovered and inflation surged, pushing them to multi-decade highs to combat rising prices. Then the Federal Reserve cut its influential federal funds rate by 50 basis points in a pivotal shift in September 2024, bringing it to…
