Investors Shouldn’t Worry About Higher Interest Rates: BMO’s Brian Belski’s Bullish Stance Supported by Four Charts

Investors need not worry about higher-for-longer interest rates, according to BMO’s Brian Belski. Despite the Federal Reserve signaling no imminent rate cuts, Belski remains bullish on the stock market. He noted that historically, stocks have performed well during periods of rising and elevated interest rates.

Belski’s stance is supported by four key charts that highlight the positive correlation between rising interest rates and stock market performance. The first chart shows that since 1990, the S&P 500 has delivered its highest annualized performance when the 10-year Treasury yield was above 6%. Currently, with the yield at 4.60%, the S&P 500 is expected to return 9.1%, outperforming the market’s average return of 7.7% when rates are below 4%.

The second chart reveals that the S&P 500 has historically performed better when interest rates were rising compared to when they were falling. Belski’s analysis shows that the average rolling one-year performance of the S&P 500 was more than double during periods of increasing rates.

Additionally, the third chart highlights that since 1990, there have been eight periods when interest rates were on the rise, and during each of those periods, stocks saw positive performance. This trend is further supported by the fourth chart, which shows that during each of the eight periods of rising interest rates since 1990, the S&P 500 posted positive performance.

Belski’s research suggests that investors should not fear higher rates, as they can be a positive backdrop for stocks. He argues that the near-zero interest rates following the 2008 financial crisis were abnormal, and a return to more normalized rates should not be a cause for concern. With historical data supporting the positive correlation between rising interest rates and stock market performance, investors can take comfort in Belski’s bullish stance on the market.