When interest rates rise
At the heart of Leon Frazer’s economic outlook is a belief that interest rates will rise. For the past 30 years long-term (10-year) interest rates were on a steady course downward, culminating in 60-year lows in the middle of the 2008-09 economic crisis.
With economies on a more stable footing, we see this 30-year downturn reversing.
From 1982 to 2000, ever-declining interest rates provided a strong tailwind for stocks. With that lower-rate tailwind now expected to turn into a higher-rate headwind, support for equities falls squarely on growth; especially growth in earnings.