Do Low Interest Rates Affect Stock Prices?


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By Derek Moore. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

Lately you have probably heard analysts going on CNBC saying given where interest rates are valuations are or are not overstretched. But how do interest rates, and low interest rates, affect stock valuations? How to they affect the cost of capital and the ROIC or return on invested capital? How do you discount down future earnings based on a discount rate?

Why interest rates matter to investors

The present value of future earnings

Interest rates and the WACC or weighted average cost of capital

How low rates may make it easier to achieve ROIC greater than WACC

Historical risk free rates in US Treasury Bonds and Bills

Mentioned in this Episode:

US Treasury Bonds Historical Yield Curve Site

Warren Buffett Indicator explained podcast and article

Derek Moore’s book Broken Pie Chart

Contact Derek

94 episodes