CORRECTION–The time frame in the initial publication of “Rising Rates–A knockout Blow?” was incorrectly stated at 8 years (An extreme case–1974-1982). The actual time frame coinciding with the stated investment performance of stocks and the 10-year Treasury should have been read as 7 years (@1975-1982).
AMPLIFICATION–It has been suggested to me by a friend and former colleague that I cherry-picked the “extreme case” that I used to make stock market performance look exceptionally good vs. bonds. He pointed out the fact that if I had started my example in 1974, market performance vs. bonds would not have been nearly as good. This assertion is true, not that I cherry picked, but that the performance of the bonds and stocks were almost the same during the 1974 -1982 period.
My assertion going into this post was that rising rates would not be a ‘Knockout Blow” for stocks. Even using the earlier start date this assertion still holds held, despite stocks falling hard during most of 1974.
My aim with this post was simply to show that even in an extremely uncertain, difficult economic and political environment, where rates rose dramatically and the price of existing issue bonds collapsed, stocks did well. I did this to counter the constant drumbeat insisting that when rates go up the market will be toast. Yes, absolutely you could get a severe correction, the likes of which we saw in January/February of this year, but it does not have to be curtains for this bull market.
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