What Interest Rates Can Do to Wal-Mart’s Stock
Looking at 40 years of daily and monthly stock prices compared to the yield on the US Treasury 10 Year bond, we discovered that 82% of the time, Wal-Mart goes up when interest rates go down.
The negative relationship holds even when during closer time periods.
Since 2000, the correlation between the two has been -73%. That means for every four months interest rates have gone up, Wal-Mart prices have gone down three months. The connection has gotten even stronger looking at data from 2005. Over the past eight years, it was -84%. And, over the last three years, it was -75%. Recent data may be weaker, but it's still pretty strong.
[For those who like even more precision, we looked at a total of 20,396 daily data points and it just about matched the monthly data].
So far this year, though, things have been a little different. Wal-Mart is up so are interest rates. In fact, the correlation between the two is only -27%. Are things different for Wal-Mart or can we expect it to fall soon?
We ask Jeff Tomasulo, Managing Partner at Belpointe Alternative Investments, and Talking Numbers contributor Steve Cortes, Founder of Veracruz TJM, where they think interest rates are going and how that will affect Wal-Mart's stock price in the future.
To hear analysis on Wal-Mart's stock and interest rates by Tomasulo and Cortes, watch the video above.
We correlated the S&P 500's monthly data with US 10 Year yields:
since 1962: -56%
since 2000: 4%
since 2005: 1%
since 2010: -54%