Why does the rise and fall of interest rate and the change of stock price move in reverse? There are three main reasons:
1. The rise of interest rate will not only increase the company's borrowing cost, but also make it difficult for the company to obtain the necessary funds. In this way, the company has to reduce the production scale, and the reduction of the production scale will certainly reduce the company's future profits. As a result, stock prices will fall. On the contrary, the stock price will rise.
2. When the interest rate rises, the discount rate used by investors to evaluate the stock price will also rise, so the value of the stock will decrease, thus the stock price will drop accordingly; otherwise, the interest rate will decrease, and the stock price will rise.
3. When the interest rate rises, some of the funds will shift from investing in the stock market to bank savings and fixed income securities, which will reduce the demand for stocks in the market and cause the stock price to fall. On the contrary, when interest rates fall, the profitability of savings will decrease, and some funds may flow from banks and bond markets to the stock market, thus increasing the demand for stocks and raising stock prices.
Since it is a general situation that interest rate and stock price move in the opposite direction, investors should pay close attention to the rise and fall of interest rate, and make necessary forecast on the trend of interest rate, so as to make a decision on stock trading before interest rate changes.
In China, we should pay more attention to the changes of the following factors in order to predict the rising and falling trend of interest rates:
● The change of loan interest rate. As the loan funds are supplied by deposits, it can be inferred that the deposit interest rate will decline according to the reduction of loan interest rate.
● The economic trend of the market. If the market is prosperous and prices rise, the state may take measures to raise interest rates and reduce market pressure by attracting residents' deposits. On the contrary, if the market is weak, the country may start the market by lowering the interest rate level.
● The tightness of the capital market and the interest rate level of the international financial market. The interest rate level of international financial market can also affect the rise and fall of domestic interest rate level and the rise and fall of stock market. In an open market system, money has no national boundaries. If the overseas interest rate level is low, on the one hand, it will have an impact on the domestic interest rate level, on the other hand, it will also attract overseas funds into the domestic stock market, driving up the stock price. On the contrary, if the overseas level rises, the opposite will happen.