Why Interest Rate Hikes Impact Stock Market Performance
Interest rate hikes have a significant impact on the performance of the stock market due to their influence on corporate profitability and investor behavior. Central banks, such as the Federal Reserve in the United States, use interest rates as a tool to control inflation usbreakings.com and stabilize economic growth. When they raise interest rates, it becomes more expensive for businesses to borrow money for expansion or operational costs. This can lead to reduced profits or even losses, which are often reflected in lower stock prices.
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Despite this potential silver lining for certain sectors though overall high-interest rate environments tend not only dampen stock market performance but also increase its volatility as investors react swiftly and sometimes excessively any hints of future rate increases by central banks.
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