The Fed's Threat to the Stock Rally
A rise in interest rates could hurt the equities market
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By the time you read this, it may already have happened: The Standard & Poor’s 500-stock index may have passed 1,565, the October 2007 peak the market has been climbing toward since the financial crisis bottomed out in March 2009.
More than five years later, stocks seem to be standing on firmer ground. The housing market is rebounding, with home prices showing their largest year-over-year increases since 2006. Jobless claims dropped to a five-year low for the week ended Jan. 19. And stocks may be, if anything, undervalued: The price-to-earnings ratio of the companies in the S&P 500 stood at 14.9 on Jan. 30, below its average of 19.8 since 1990.