Influence of low interest rate environments on stock market returns
Billionaire Larry Robbins looked back at the important influence that low interest rate environments have on stock market returns.
He says “every time ONE of these (following) conditions has existed, the market has produced positive returns.”
Here they are:
1. When the 30-year bond yield begins the year below 4%, stocks go up 22.1%.
2. When investment grade bonds yield below 4%, stocks go up 16%.
3. When high yield bonds yield below 8%, stocks go up 11.6%.
4. When cash as a percent of asset for non-financials is above 10%, stocks go up 17.6%.
5. When the Fed tightens 0-75 basis points in the year, stocks go up 22%.
6. When oil falls more than 20%, stocks go up 27.5%.
His study showed that there has NEVER been a down year in stocks, when any ONE of the above conditions is met.
It worked in 2015. It worked in 2016. But now, not only does ONE of these conditions exist, ALL of these conditions exist. Yields are ultra-low, cash is high, the Fed is tightening and oil has fallen by more than 20% this year!
Source: Forbes