FXStreet reports that the abundance of liquidity is leading, at portfolio equilibrium, to a rise in both bond prices and share prices, and therefore to a negative correlation between long-term interest rates and stock market indices, per Natixis.

“The correlation between long-term interest rates and share prices is normally expected to be positive. In recessions, risk aversion rises, inflation falls, corporate earnings decline and monetary policy becomes more expansionary. Everything, therefore, works to push down both long-term interest rates and stock market indices. In periods of growth, on the contrary, risk aversion falls, inflation rises, earnings increase, monetary policies become more restrictive and one can expect a rise in long-term interest rates and stock market indices.”