Equity investors want low interest rates

Equity markets in the United States and the euro zone have clearly reacted positively in the recent period to the prospect of interest rate cuts : equity investors want low interest rates, probably because, late in the expansion period, it is harder to sustain share prices with rising profits. This demand for low interest rates is so strong that, paradoxically, equity markets react poorly to good news on the economy. The key question is whether central banks will be forced to make the interest rate cuts that equity investors are calling for. In the past, monetary policy seems to have reacted to share price trends in the euro zone but not in the United States. This econometric finding, which results from monetary policy during the period 2009-2014, is surprising.