Although the relationship between interest rates and the stock market is fairly indirect, the two tend to move in opposite directions. Here's why:A decrease in interest rates means that those people who want to borrow money enjoy an interest rate cut. But this also means that those who are lending money, or buying securities such as bonds, have a decreased opportunity to make income from interest. If we assume investors are rational, a decrease in interest rates will prompt investors to move money away from the bond market to the equity market. At the same time, businesses will enjoy the ability to finance expansion at a cheaper rate, thereby increasing their future earnings potential, which, in turn, leads to higher stock prices. Investors and economists alike view lower interest rates as catalysts for expansion.
OK.. investopedia explains it in a good way.. But can we really say the relationship with int rates and stock market performance is not related? Looking at how CSE operates?
We've seen at the pinnacle of int rates for FDs in 2011, stock market also made the peak and crashed. Those days, banks gave 20-25% FD rates for 2-5 years deposits. So cant blame ppl ig they wanted to move out from the market thinking that its too high...
It has come to this point at least now with 10-14% rates.. When FD rates are high, ppl diversify their portfolios to FDs cuz its a sure shot than market up-downs. But when the rates are low, they tend to take a small risk and trade/invest.
Then comes Antonym's enlightenment what a lower int. rates would do.. Yes, on the other hand, it invites ppl to spend more since what they gain from savings is peanuts.. But how other countries have survived? Imo, their rates are much lower 2-5%, even their lending rates are the same.
We understand ur point too.. Its frustrating to see jokers around MR. But we cant change the system that's been there so easily.
What government institutions do every-time cannot be MR's decisions and I dont think even MR has a clue on what to do to make the economy grow.. Only the ppl who have some knowledge in this area would ask him to implement this and that.
But doing so, he also cannot make all ends equal squares, can he?
So, we, as educated, should look at these things in an non-political angle and see what positives to be expected than negatives..
Therefore, rather than blaming jokers who mislead MR, u can also add few points here rite? Ur matured, well educated, experienced in life. So you have a great and worthy cause to undertake here - enlighten the youngsters, share your experiences to educate them to be of worthy citizens in SL. in a non-political manner.. No MR, govt is needed for such rite?