When interest rates rise it becomes more expensive for companies to borrow money. This can lead to lower profits and as a result lower stock prices.
In addition when rates rise many investors shift their money from stocks to bonds. This is because bonds provide a fixed return while stock prices are more volatile. As more money flows into bonds demand for stocks decreases and prices fall.
Lastly rising rates can also cause inflation to increase. This can eat into corporate profits and lead to lower stock prices.
While there are many factors that can influence stock prices rising interest rates can be a headwind for the market. This is why it’s important to monitor rates when making investment decisions.
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