long rates are rising and stocks are tanking. timing couldn't be worse for donnie. [View all]

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donnie is an historically unpopular president.

the one thing that has been enabling the media to portray him as someone the country can tolerate is that the economy and the financial markets have been doing well, despite donnie's penchant for delivering the occasional heart attack via tweet.


but long rates finally started rising recently, and the sentiment seems to be that this may be the start of a secular shift -- the beginning of a long and steady march toward substantially higher long-term rates, as opposed to the historically low rates we've had for over a decade.

this shift in long-term rates has a host of negative implications for the stock market.

first, stock valuations are compared to a discount rate which will now be projected to be higher. so stock valuations across the board will be lower given higher interest rates.

second, stocks have been performing well in part due to lack of investment competition. bonds paying tiny interest rates are safe, but hardly appealing. now that bond interest rates may soon start to have meaningful payouts, people might take money out of stocks and put them into debt. this means lower demand for stocks, ergo, lower prices.

third, companies will face more expensive borrowing, which directly hurts their profitability, reducing their upside and increasing their risk of complete failure.


this is coming about just one month before the election. if this shift in expectations of future interest rates continues throughout october and into november, it could mean more headline bad news for the stock market going right into the midterms.

it could turn make democratic gains, already expected to be huge, even larger.

hell, we might even win the senate!