[Interest Rates at 5% Range for the First Time in 19 Years] S&P 500 Was Positive One Year Later in 47 Out of 67 Instances of Sharp Rises | US Stocks on September 25
Hello, this is Mocomoco.
US long-term interest rates are gradually rising. Long-term interest rates refer to the yield on debt that the US government will repay over 10 years (10-year Treasury bonds). Mortgage rates and corporate borrowing rates are determined based on this figure.
The closing price on September 24 was 5.16%. It crossed 5% on September 16, marking the first time in 19 years since July 2007. It has risen by 0.46% in just this past month.
It is said that rising interest rates are a headwind for stocks. This is because the cost of borrowing money increases, and more people think that if they can get 5% from government bonds without buying stocks, they might as well do that. I also saw the news and braced myself a little. So, I counted. What happened to the S&P 500 one year after interest rates rose sharply in a short period?
I will write the conclusion first.
✅ In the approximately 64 years since 1962, there were 67 instances where long-term interest rates rose by 0.4% or more in one month. After that, the S&P 500 was positive one year later in 47 instances (70%). The median is +11.7%.
✅ Regardless of the day you buy, the median one year later is +10.5%, and the positive rate is 75%. After interest rates rise sharply, it is slightly easier to lose. However, the median was almost the same.
✅ One year after buying on a day when interest rates were 5% or higher, the median was +9.5%. This is slightly lower than on days below 5% (+11.6%), but the fact that it ends positive in more years remains unchanged.
Interest rates are a headwind for stocks. This is true. However, as far as past data shows, the S&P 500 moved forward in many years even amidst the headwinds.
🔸 Before that, the market on September 24
Stocks barely moved. The S&P 500 was -0.02%, and the NASDAQ 100 was +0.03%. The semiconductor stock index (SOX) fell by 0.33%, and undervalued stocks such as banks (large-cap value stocks) fell by 0.26%.
What moved were interest rates and crude oil. The 10-year Treasury yield went from 5.11% to 5.16%. Crude oil rose by 1.07%. Crude oil fell temporarily on reports that the US and Iran were proceeding with talks. After that, news of new attacks in the Middle East came in, and it rose again.
The dollar-yen was in the 158 yen range, and at one point, the yen weakened to exactly 159 yen. Because of the weak yen, our valuation held in yen has increased slightly.
🔸 Why are interest rates rising?
It is because US economic indicators came in stronger than expected. The index showing corporate business sentiment (PMI) was at a 5-year high.
A good economy is originally good news. However, when the economy is good, prices are also likely to rise, so it becomes easier for the central bank to continue raising interest rates. The market sees that “there will be another rate hike next time” and is raising interest rates in advance. For stocks, good economic news pushes up interest rates, and those interest rates suppress stock prices. This is the current situation.
In the long run, 5% is not a particularly high level. In 1981, it had risen to 15.8%. Even so, because it had not reached 5% even once in these 19 years, the current figure is a height seen for the first time in a while. For the 14 years from 2008 to 2021, 80% of days were 3% or less.
🔸 After interest rates rise sharply, the S&P 500 is
I will write down the counting method first.
・Using the S&P 500 closing price (excluding dividends) and the US 10-year Treasury yield
・The period is from January 1962 to September 24, 2026.
・A day where the yield is 0.4% or more higher than 21 business days (about 1 month) ago is defined as a “sharp rise.” For consecutive occurrences, I count only once every six months.
・I buy at that day’s closing price and compare it with the closing price 252 business days (about 1 year) later. Instances where one year later has not yet arrived were excluded. The remainder is 67 instances.
Out of the 67 instances, 47 were positive one year later. The median was +11.7%.
The worst was -42.0% in December 2007. The Lehman Shock followed this. The -28.3% in July 1973 was an instance where prices rose sharply due to the oil shock that followed. I am presenting these two as unfavorable figures.
Conversely, the best was +47.6% in June 1982. This was when interest rates had risen to nearly 14%. After high interest rates calmed prices, stocks rose significantly.
The percentage of days where buying resulted in a positive return one year later is 75%. Since it is 70% after a sharp rise, it is 5 points lower. However, the medians are +11.7% and +10.5%, which are almost the same. This data does not go so far as to say, “You shouldn’t buy stocks for a while because interest rates have risen suddenly.”
🔸 Is it a loss to buy in an era of 5% or higher interest rates?
Another thing I am curious about is not the “way” interest rates rise, but their “level.” I compared people who bought on days with 5% or higher against those who bought on days with less than 5%.
・The period is also from January 1962 onwards. Only days where one year later is known
・There were 8,648 days with 5% or higher, and 7,269 days with less than 5%.
・I bought on each of those days and compared the price movement 252 business days later.
One year after buying on a day with 5% or higher, the median was +9.5%, and the percentage that was positive was 70%. For days with less than 5%, it was +11.6% and 81%.
There is a difference. In particular, the percentage that ended positive has an 11-point difference. However, more than half of the days with 5% or higher were in the 1970s and 80s. Since this was an era when prices were rising significantly, not only the height of interest rates but also the volatility of prices is included.
Even so, the median one year later in an era of high interest rates is +9.5%. If you have 1 million yen, the middle point one year later is 1.095 million yen. The difference was not enough to support the decision to avoid stocks because interest rates are high.
💡 Remember just this
U.S. long-term interest rates have risen to the 5% level for the first time in 19 years. That is an increase of 0.46% in one month.
There have been 67 instances where interest rates rose by 0.4% or more in a single month. In 47 of those cases, buying the S&P 500 resulted in a positive return one year later. Compared to buying on an average day, the percentage of positive outcomes is slightly lower, while the median is almost the same.
Rising interest rates are a headwind for stocks. However, even in years with headwinds, the S&P 500 has moved forward in most years.
🔸 Finally, what I did
Seeing the news about interest rates, I did not touch my investment plan settings. The usual amount will be purchased on the usual day.
Instead, I added just one line to my investment record memo: “Out of 67 times interest rates rose sharply, 47 were positive one year later. The worst year was -42%.” By listing both the good and bad numbers, I can read future news about interest rates causing stock drops as a scenario where either outcome is possible. It took less than a minute to write.
I cannot control interest rates or exchange rates. What I can control is how much I invest each month and whether or not I keep holding without selling. I have decided to focus only on that.
Let’s keep at it steadily this week too 😊
P.S. On Saturday nights, I also write a weekly edition that summarizes the week. Please check that out as well if you’d like.
(Data source: Yahoo Finance. All charts were created by the author from public data.)