Some investors have asked if stocks make sense in a world where short-term US Treasuries are yielding north of 5.5%.1 These investors can take solace in the historical evidence, which suggests that interest rates have not been meaningful predictors of stock returns. In years with above-median interest rates since 1955, during which the average three-month Treasury yield was 6.7%, US stocks returned an average of 12.1%. This is slightly higher than the average return in below-median interest rate years (11.6%), although the averages are statistically indistinguishable from each other.
High Rates Don’t Put the Brakes on Stocks
