How does an increase in interest rates typically impact equity markets?
Stock prices often fall when interest rates rise because higher rates increase borrowing costs for companies and consumers, which can slow economic growth and reduce corporate profits. Additionally, as interest rates rise, fixed-income investments like bonds become more attractive compared to stocks, leading some investors to shift their money out of the stock market. This reduced demand for stocks can put downward pressure on prices. The overall impact depends on the pace and expectations of rate changes, as well as the broader economic environment.