The Resilient Stock Market
This has happened time and time again during the historic economic recovery. Since the Dow hit a low of just under 6,500 in March of 2009, the recovery of the stock market has been dramatic to say the least. At its peak this year, the Dow has crossed the 26,000 barrier several times, which represents more than a 400% recovery over the past ten years. But the gains have not been on a straight line and this year has been no exception.
Just a few short weeks ago, stocks were headed south while the trade war rhetoric was raging. What caused the turnaround? We would like to say that it was the fact that we solved all of the trade problems. What really happened is that interest rates fell because market analysts were predicting grave consequences from the trade war. We can surmise that traders like lower rates more than they fear trade wars.
This is not the first time that bad news became good news. Lower rates are not just good news for stock owners. They are good news for homebuyers and anyone who is borrowing money. Some would say that there is a sale on money going on. Refinancing is up and so is homebuying sentiment according to Fannie Mae. Higher stocks and lower rates? That is the real good news. As long as the trade wars don’t cause the economy to suffer too badly.
Article provided by Central Bank