investing guide

Interest Rates And The Stock Market

interest rates and stocks

Interest rates and the stock market have a direct cause and effect relationship.

When the Federal Reserve Board raises or lowers interest rates the stock markets react almost immediately. As you begin investing and following media reports, about the stock market, you will see how big of a deal it is when the FED makes announcements about whether it is going to lower or raise interest rates.

When the FED decides to lower rates the stock market tends to go up, and when it decides to raise rates the stock market tends to go down.

This is because we live in a society that likes to borrow money to buy things with. Which means the higher the interest rates are the less people will tend to buy things; thus, the less profitable companies as a whole tend to be.

So it is always a good idea to pay attention to what the FED has to say when it comes to interest rates, because they do have quite an impact on the stock market.