How do interest rates impact the stock market?

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How do interest rates impact the stock market?

Rounding it up

  • In general, lower interest rates lead to higher stock prices while higher rates tend to lead to falling stock prices.

  • Interest rates are normally set by central banks like the Bank of Canada in order to bolster or rein in a country’s inflation rate and the economy.

  • The relationship between interest rates and stock prices is imperfect, and there are many sectors that thrive, even as rates increase.

  • There’s always a chance of losing money when you invest, but a long-term investing strategy with a well-diversified portfolio is often more resilient to interest rate changes than a short-term strategy that’s invested in only a few volatile sectors.

8 min read

Gaby Pilson
#interest rates#stock market#Bank of Canada#Economy

Gaby Pilson

Gaby Pilson is a writer, educator, travel guide, and lover of all things personal finance. She’s passionate about helping people feel empowered to take control of their financial lives by making investing, budgeting, and money-saving resources accessible to everyone.

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