What one can not state about equities [stocks] one can indeed state about interest rates.
Stocks are a “random walk” which is a price change theory [not a price theory]. Within random walk theory, past price changes have no bearing on future price change.
The reverse is true with interest rates.
There are a wide variety of interest rates. However, the wide variety of interest rates tend to move together. Past interest rates, in the main, do have a bearing on future interest rates. How so? When interest rates are very low, interest rates tend to move back [up] to the historical average of interest rates. When interest rates are too high, interest rates tend to move back [down] to the historical average of interest rates. It is a widely known repetitive trend and pattern [see graph].
1 comment:
Love the graph. The graph tells a story.
What one can not state about equities [stocks] one can indeed state about interest rates.
Stocks are a “random walk” which is a price change theory [not a price theory]. Within random walk theory, past price changes have no bearing on future price change.
The reverse is true with interest rates.
There are a wide variety of interest rates. However, the wide variety of interest rates tend to move together. Past interest rates, in the main, do have a bearing on future interest rates. How so? When interest rates are very low, interest rates tend to move back [up] to the historical average of interest rates. When interest rates are too high, interest rates tend to move back [down] to the historical average of interest rates. It is a widely known repetitive trend and pattern [see graph].
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