Tags: SocGen | interest | rates | stocks

SocGen Analysts: Higher Interest Rates Won't Hurt Stocks

By    |   Monday, 22 September 2014 11:58 PM

Some financial market participants worry that U.S. interest rates will surge, undercutting stocks, but Societe Generale analysts Patrick Legland and Daniel Fermon don't share that concern.

They think that rates will rise only gradually, which will keep stocks from falling.

"The risk is that a sudden and sharp re-pricing of U.S. rates could trigger higher volatility in both the bond and equity markets," the duo writes in a report obtained by MarketWatch.

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"This could happen in the event of better economic data and a pick-up in inflation. But, our economists don’t see any convincing sign of inflation or any strong improvement in wages until the tail-end of the year."

Consumer prices rose 1.7 percent in the 12 months through August.

The 10-year Treasury yield may well rise back to December's level of 3 percent from 2.57 percent Monday, Legland and Fermon write. But, "this should not imply a correction in the US equity market," they say.

"Fed policy will remain supportive for equities as long as inflation remains in check."

David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates, isn't too worried about stocks either.

"No doubt equities will have an adjustment phase as the discount rate used to discount future profits moves higher over time," he writes in a commentary obtained by CNBC.

"But bear markets don't start until investors see the whites of the eyes of the recession, and that is still likely a few years away."

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Some financial market participants worry that U.S. interest rates will surge, undercutting stocks, but Societe Generale analysts Patrick Legland and Daniel Fermon don't share that concern.
SocGen, interest, rates, stocks
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2014-58-22
Monday, 22 September 2014 11:58 PM
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