ETF Trading and Investing Strategies (Collection)

11. What Bonds Can Tell You about Stocks: How to Use Interest Rates

Interest rates are perhaps the most influential factors of stock market performance. However, translating a knowledge of interest rates into a specific plan of action for your equity investments is no simple matter. In a nutshell, two features of the interest rate climate are important to follow as an equity investor:

• Whether interest rates (as a whole) are rising or falling
• Whether it costs more for the U.S. Treasury to take out long-term loans or short-term loans

This chapter describes how the interest rate environment (as reflected in bond market data) affects the stock market. It also explores some simple rules to help you use interest rate data as a warning signal for ...