What rising rates will not do
With the Monetary Policy Committee meeting today, and speculation around whether or not the Committee and their counterpart in the US will raise interest rates this year or next continues, Fei Mei Chan, Associate Director of Index Investment Strategy at S&P Dow Jones Indices, studies the historical index data and suggests that contrary to conventional wisdom, there are at least three things that rising interest rates will NOT do:
- They won’t tell us whether the stock market is going up or down.
- They won’t cause stock market dispersion to widen, providing an easier environment for active managers to add value.
- They won’t tell us how to choose between pairs of nominally opposite factor indices.
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