> The notion that changes in interest rates, which generally correlate with inflation, would alter the price of stocks is not obvious to me. Not sure what mechanism you would propose that would cause that to happen.
Higher rates -> reduced accessibility of personal credit -> lower spending -> lower corporate revenue -> higher cost of borrowing -> higher cost of debt service -> lower profits -> stock price
Rates act as a global parameter that impacts performance of companies differently, with the consensus understanding that it impacts debt-fuelled (or what we now usually call growth) companies the most.
This. As bond rates rise capital moves out of stocks over to bonds. Bonds are higher in the capital structure as well. When bond rates go absurdly low capital moves into stocks (as we have seen).
Doesn't matter. People don't invest exclusively in one of stocks or bonds, but diversify. A higher interest rate might make bonds slightly more attractive on a continuum.
Higher rates -> reduced accessibility of personal credit -> lower spending -> lower corporate revenue -> higher cost of borrowing -> higher cost of debt service -> lower profits -> stock price
Rates act as a global parameter that impacts performance of companies differently, with the consensus understanding that it impacts debt-fuelled (or what we now usually call growth) companies the most.