Paradox of high interest rates and a resilient economy
Why have higher interest rates failed to induce an economic slowdown?
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THE US’ booming stock market has brought much cheer to investors. From December 2019 to March 2024, the S&P 500 index saw a total US dollar return of 74 per cent, compared to 48 per cent and 16 per cent for Euro Stoxx 50 index (Europe) and MSCI Asia Pacific index (Asia), respectively.
The outperformance is a result of the US’ economic resilience and a higher representation of technology stocks. And despite the consensus view in early 2023 when some investors feared that an impending interest rate cut coupled with low unemployment rate would point to a late cycle, which is usually followed by a recession, the US economy has stayed healthy so far.
Why have higher interest rates failed to induce an economic slowdown?
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