REPORT

Interest Rates and Equity Factors

Which equity factors should investors favor when interest rates rise?

Higher than expected inflation has forced central banks around the world to raise interest rates, bringing an important question to the forefront for factor investors: How do equities perform when rates rise and which factor exposures should be favored?

To find the answer, our research team examined the correlation between equity factor returns and rate levels over the past 30 years for the US and UK. Their analysis reveals:

  • Which factors are most sensitive to interest rate changes by region
  • The role of macroeconomic causes—and why rates alone do not explain factor shifts
  • How credit risk spreads and inflation expectations affect factor returns

Download our Interest Rates and Equity Factors report today to learn more. See why taking a broader view of the causes behind rate increases can help your investment strategy.

 

About the Author:

Eduardo Jimenez Martin, CFA, FRM
Senior Consultant,
Investment Metrics, a Confluence Company

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