Rising interest rates could benefit shares
April 3rd, 2010
Investors should not worry about future increases in interest rates, according to a recent study by CIBC World Markets.
"The shareholders should wait before pressing the button sales, says the chief economist of CIBC, Avery Shenfeld. History shows that the six months prior to a tightening of monetary policy often coincides with a significant increase in stock markets. "
"Actions often outperform bonds in the first months following the rate hike," he adds.
The study by CIBC World Markets says in effect that the Canadian market reported an average of nearly 22%, according to the TSX Composite Index in the six months preceding the rising rate of the Bank of Canada.
The best performance was recorded a yield of 34% recorded in W after
"The shareholders should wait before pressing the button sales, says the chief economist of CIBC, Avery Shenfeld. History shows that the six months prior to a tightening of monetary policy often coincides with a significant increase in stock markets. "
"Actions often outperform bonds in the first months following the rate hike," he adds.
The study by CIBC World Markets says in effect that the Canadian market reported an average of nearly 22%, according to the TSX Composite Index in the six months preceding the rising rate of the Bank of Canada.
The best performance was recorded a yield of 34% recorded in W after
the recession of the early 80s. In contrast, there was a decrease of 4% at the higher 2004 rate. The yield was negative in only two occasions.
"The actions should be linked to the present value of future returns and dividends, says Avery Shenfeld. Central banks do not begin to set foot on the brake at least to see a real economic growth on the horizon. "
But it notes that rate increases tend to have negative effects later in the tightening cycle, when banks are becoming bolder and more aggressive in their fight against inflation.
"But now, we are very far from the risk of economic growth to curb inflation and raise rates, warns Avery Shenfeld. The increases in coming, but not fast enough to cause real headaches for investors in equity markets. "
"The actions should be linked to the present value of future returns and dividends, says Avery Shenfeld. Central banks do not begin to set foot on the brake at least to see a real economic growth on the horizon. "
But it notes that rate increases tend to have negative effects later in the tightening cycle, when banks are becoming bolder and more aggressive in their fight against inflation.
"But now, we are very far from the risk of economic growth to curb inflation and raise rates, warns Avery Shenfeld. The increases in coming, but not fast enough to cause real headaches for investors in equity markets. "
