Expert comments: How the fear of higher interest rates on the stock markets has subsided

Expert comments: How the fear of higher interest rates on the stock markets has subsided

According to a report by www.faz.net,

For a while, fear of higher interest rates was deeply rooted in the stock markets. Strong economic data caused as much concern as weak economic data, as it influenced expectations for interest rate developments and economic growth. But in recent weeks the mood on the stock markets has changed, particularly due to the recent decisions of the Federal Reserve and the European Central Bank (ECB) regarding interest rate developments.

Sven Streibel, chief equity strategist at DZ Bank, notes that fears of rising interest rates on the stock market have eased significantly. This is due to the expectation of further interest rate hikes by the Fed and the ECB, which, however, are no longer causing unrest in the markets.

The report says America's Federal Reserve is leaning towards pausing interest rate hikes, having raised interest rates to just over 5 percent 10 times in the last 15 months. However, a decision on interest rates is still pending and depends on the May inflation figures. In Europe, the ECB is expected to raise interest rates by 0.25 percentage points as inflation in the euro area was 6.1 percent in May.

The increasing importance of monetary policy for the economy is also being discussed, especially after economic growth slowed significantly in the first quarter.

Given this information, equity markets now appear to view higher inflation and associated interest rate hikes as economic strength. This is seen as a sign that higher prices can be paid and provide companies with higher profits.

From a financial expert's perspective, this change in interest rate assessments could result in increased demand for stocks and a decline in interest in bonds. This could lead to an increase in stock prices and a reallocation of investment portfolios. However, the long-term impact on the market depends on a variety of factors, including the actual decisions of the Fed and ECB as well as global economic developments.