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INTEREST RATES
& STOCK MANIAS
JULY 14, 2000
No Need to Worry Until Interest Rates Head Down in
September
Our conclusions on interest rates and speculative stock markets is based upon empirical evidence rather than intuitive conjecture. Earlier in the year, the T-Bill rate soaring to 6.20% prompted hand-wringing at both the official and pundit levels.
As previous speculative rushes were attended by rising interest rates, there was little need to worry until rates turned down. These typically attend subsequent
sell-offs. This has been the case and renewed convictions in equities has been accompanied by bill rates rising from the low of 5.61% on May 31 to 6.16% this week.
To add to Alfred E. Newman's dictum, there is no need to worry until rates turn down, which has been expected to start in early September.
[Emphasis added]
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